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SMALL BUSINESS CONTRACTING: ENSURING 

OPPORTUNITIES FOR AMERICA’S SMALL 

BUSINESSES 

ROUNDTABLE 

BEFORE THE

COMMITTEE ON SMALL BUSINESS AND 

ENTREPRENEURSHIP 

UNITED STATES SENATE 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

SEPTEMBER 22, 2009 

Printed for the Committee on Small Business and Entrepreneurship 

( 

Available via the World Wide Web: http://www.fdsys.gov 
(II) 

COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

ONE HUNDRED ELEVENTH CONGRESS 

MARY L. LANDRIEU, Louisiana, Chair 

OLYMPIA J. SNOWE, Maine, Ranking Member 

JOHN F. KERRY, Massachusetts 

CARL LEVIN, Michigan 

TOM HARKIN, Iowa 

JOSEPH I. LIEBERMAN, Connecticut 

MARIA CANTWELL, Washington 

EVAN BAYH, Indiana 

MARK L. PRYOR, Arkansas 

BENJAMIN L. CARDIN, Maryland 

JEANNE SHAHEEN, New Hampshire 

KAY HAGAN, North Carolina 

CHRISTOPHER S. BOND, Missouri 

DAVID VITTER, Louisiana 

JOHN THUNE, South Dakota 

MICHAEL B. ENZI, Wyoming 

JOHNNY ISAKSON, Georgia 

ROGER WICKER, Mississippi 

JAMES E. RISCH, Idaho 

DONALD R. CRAVINS, JR., Democratic Staff Director 

WALLACE K. HSUEH, Republican Staff Director 
(III) 

C O N T E N T S 

OPENING STATEMENTS

Page 

Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana .................. 1 

WITNESSES

Drabkin, Dave, Senior Procurement Executive, Deputy Chief Acquisition Officer and Deputy Associate Administrator for Acquisition Policy, General 

Services Administration ...................................................................................... 8 

Sullivan, Ann, Women Impacting Public Policy .................................................... 8 

Hesser, Bob, Vet Force representative ................................................................... 8 

Dorfman, Margot, Chief Financial Officer, U.S. Women’s Chamber of Commerce ..................................................................................................................... 8 

Chvotkin, Alan, Professional Services Council ...................................................... 8 

Brubeck, Ben, Director of Labor and State Affairs, Associated Builders and 

Contractors ........................................................................................................... 8 

Fingarson, Ashley, Director of Legislative Affairs, Associated Builders and 

Contractors ........................................................................................................... 8 

Willis, Greg, General Counsel (Majority Staff), Committee on Small Business 

and Entrepreneurship .......................................................................................... 8 

Hontz, Karen, Small Business Administration ..................................................... 8 

Walker, Matt, Deputy Staff Director and Counsel (Republican Staff), Committee on Small Business and Entrepreneurship ............................................. 8 

Reece, Adam, Professional Staff Member (Republican Staff), Committee on 

Small Business and Entrepreneurship ............................................................... 8 

Newlan, Ron, HUBZone Council ............................................................................ 8 

Oliver, Linda, Acting Director, Office of Small Business Programs, U.S. Department of Defense ............................................................................................. 8 

Jordan, Joe, Associate Administrator, Government Contracting and Business 

Development, U.S. Small Business Administration .......................................... 9 

Robinson-Berry, Joan, Co-Chair, TRIAD ............................................................... 9 

Ferrera, David, Vice President, Government Relations, U.S. Hispanic Chamber of Commerce ................................................................................................... 9 

Zepeda, Sam, Vistas Construction .......................................................................... 9 

APPENDIX MATERIAL SUBMITTED

Brubeck, Ben 

Testiminy .......................................................................................................... 8 

Prepared statement .......................................................................................... 41 

Chvotkin, Alan 

Testiminy .......................................................................................................... 8 

Dorfman, Margot 

Testiminy .......................................................................................................... 8 

Drabkin, Dave 

Testiminy .......................................................................................................... 8 

Ferrera, David 

Testimony .......................................................................................................... 9 

Fingarson, Ashley 

Testimony .......................................................................................................... 8 

Hesser, Bob 

Testiminy .......................................................................................................... 8 

Prepared statement .......................................................................................... 90 

Hontz, Karen 
Page

IV 

—Continued 

Testimony .......................................................................................................... 8 

Jordan, Joe 

Testimony .......................................................................................................... 9 

Landrieu, Hon. Mary L. 

Opening statement ........................................................................................... 1 

Prepared statement .......................................................................................... 3 

Newlan, Ron 

Testimony .......................................................................................................... 8 

Oliver, Linda 

Testimony .......................................................................................................... 8 

Reece, Adam, 

Testimony .......................................................................................................... 8 

Robinson-Berry, Joan 

Testimony .......................................................................................................... 9 

Snowe, Hon. Olympia J. 

Prepared statement .......................................................................................... 38 

Sullivan, Ann 

Testiminy .......................................................................................................... 8 

Walker, Matt 

Testimony .......................................................................................................... 8 

Willis, Greg 

Testimony .......................................................................................................... 8 

Zepeda, Sam 

Testimony .......................................................................................................... 9 
(1) 

SMALL BUSINESS CONTRACTING: ENSURING 

OPPORTUNITIES FOR AMERICA’S SMALL 

BUSINESSES 

TUESDAY, SEPTEMBER 22, 2009 

UNITED STATES SENATE, 

COMMITTEE ON SMALL BUSINESS

AND ENTREPRENEURSHIP, 

Washington, DC. 

The Committee met, pursuant to notice, at 10:12 a.m., in room 

SR–485, Russell Senate Office Building, Hon. Mary L. Landrieu 

(chair of the committee) presiding. 

Present: Senators Landrieu and Risch. 

Staff present: Greg Willis, Don Cravins, Karen Hontz, Adam 

Reece, and Matt Walker. 

OPENING STATEMENT OF HON. MARY L. LANDRIEU, CHAIR, 

AND A U.S. SENATOR FROM LOUISIANA 

Chair LANDRIEU. Good morning, everyone. Thank you so much 

for joining us for our Small Business Committee Roundtable, the 

focus of which is contracting with the Federal Government. Please 

forgive us for being a few minutes later and for the awkward setup. This is not our normal room, but we are grateful for whoever 

allowed us to use it this morning. It is just a little different than 

what our staff is used to, but we are grateful for the space since 

ours is under renovation. 

I thank you for joining me for this roundtable, and we look forward to hearing from all of you today who are experts on this subject so that we can improve and expand small business opportunities for contracting with the Federal Government, which is the 

largest purchaser of services, products, and machinery in the 

world. We want small businesses represented here today to have 

an opportunity, a maximum opportunity, to participate in the purchasing power of the Federal Government for many reasons, but 

one of them is that the small businesses in America are often the 

drivers of innovation. They are an absolutely essential component 

of a vibrant economy, creating high-paying jobs, new prospects for 

women and minorities, innovation, technology, and cutting-edge 

products. These are, in fact, challenging times. We have all been 

struggling through them, and more than 80 percent of the jobs lost 

since November coming from small and medium-sized businesses. 

This Committee has been focused on many important issues the 

last couple of months since I have come into the chairmanship, 

working closely with my very able Ranking Member, Senator 
2 

Snowe. We have focused on health care issues, we have focused on 

access to capital. Today we want to focus on contracting with the 

Federal Government. 

Let me just make a few brief opening remarks, and then I am 

going to ask everyone to introduce themselves and then turn some 

of the questions over to the staff, both Greg Willis and Don Cravins 

and the minority staff, for questioning. 

In these particular areas that I mentioned, Government can be 

very helpful. Today we want to explore how the Federal Government has or has not been hopeful. We want to explore increased 

contracting opportunities, and we want to review the goals that are 

set by the Federal Government. Generally, at 23 percent of expenditures, those goals have not been met in the last year; however, the 

volume of contracting work has increased, which is good, but the 

percentages have slipped. We are going to review those in just a 

minute. 

President Obama has pledged to improve these numbers. It is a 

goal that his Administration supports, and one that we support as 

well. 

Let me go over just a few things that are probably obvious to 

those here, but small businesses have trouble gaining access to contracts because, unfortunately, there is a maze of complicated laws 

and regulations that make it difficult. Some of the barriers include 

contract bundling, standard sizes with loopholes for big businesses, 

lack of protection for subcontractors, difficult-to-navigate General 

Services Administration schedules at times. 

When Federal agencies bundle contracts, it limits a small business’ ability to bid, reduces competition, and, unfortunately, leaves 

the taxpayer to pick up the tab for increased costs over time. We 

will review some of the other barriers as we move forward today. 

Let me also mention I have heard from a number of small businesses that they have waited months to get paid after completing 

their work. That can be very difficult for businesses that are on 

tight credit lines and budget restraints. So please be free to make 

some of those suggestions as well. 

And finally, as we prepare to reauthorize the contracting provisions of the Small Business Act and create legislation to strengthen 

contracting opportunities, I look forward to learning how to fix 

these problems and moving forward. 

I also would really prompt your feedback, ladies and gentlemen, 

on the stimulus package, the extra spending that has been given 

to almost every agency at the Federal level and to the states as 

well. Is your business or those that you represent experiencing an 

uptick in contracting because of that? Or is that money available 

or that expenditure available? I would like to learn more about 

that today. 

Basically that is our charge for this morning. I would like to ask 

each of you, starting with Ann, our representative from GSA, to 

start by introducing yourself. We will go around the room, and then 

we will start with some questions and comments to lead this discussion. So, please. 

[The prepared statement of Chair Landrieu follows:] 
3 

Opening Statement of Chair Mary Landrieu 

September 22, 2009 

Small Business Committee Roundtable 

"Small Business Contracting: 

Ensuring Opportunities for America's Small Businesses" 

INTRODUCTION 

• Good morning and thank you for joining us at this roundtable today to 

look at ways to improve and expand small business contracting. 

• Small businesses are responsible for a stronger economy, high-paying 

jobs, new prospects for women and minorities, and innovative, cuttingedge products. 

• But in these dire economic times they've been especially hard hit, with 

more than 80 percent of the jobs lost since November coming from 

small and medium-sized businesses. 

• For this trend to change, small businesses need: 

1. Access to capital - which we will focus on in the coming weeks 

at another Committee roundtable. 

2. And increased sales. 

CONTRACTING 

• In both of these areas the federal government can be especially helpful. 

Today we want to look at how the federal government can Increase 

sales for small businesses through government contracts. 

• Increasing contracting opportunities for small businesses is important 

for a number of reasons. 
4 

o First, the federal government is the largest purchaser in the world 

so it is uniquely positioned to offer business opportunities for 

small businesses of every shape, size and product offering. 

o Second, because federal contracts can provide small firms with a 

consistent source of revenue over a longer period of time, they 

can help small businesses maintain a stable cash flow during 

these uncertain times. 

o And third, by helping to stabilize small businesses through 

government contracting we can speed up the economic recovery 

and job growth that we all want. 

• That's the good news. The not so good news is that we can and must 

do much more to ensure that small businesses are getting contracting 

opportunities across the federal government. 

• As everyone here knows the federal government has a goal of spending 

23 percent of its procurement dollars with small businesses. 

Unfortunately, the latest numbers from FY 2008 leave a lot to be 

desired. 

o Last month, the Small Business Administration released data on 

the contracting dollars disbursed last year. In 2008 small 

businesses received $93.3 billion in federal contracts, an increase 

of almost $10 billion from 2007. 

o However, that meant that the government fell short of its 23 

percent goal, with 21.5 percent of contracting dollars going to 

small businesses. 

• We can do better. President Obama has pledged to improve those 

numbers by increasing public knowledge of federal contracting 

opportunities and I will continue to do the same. We all know that there 

is still much work to be done. 

PROBLEMS WITH CONTRACTING 

2 
5 

• Small businesses have trouble gaining access to contracts because of a 

maze of complicated laws and regulations that make it difficult for 

them to succeed. 

o Those barriers include contract bundling, size standards with 

loopholes for big businesses, a lack of protections for subcontractors, and a difficult to navigate General Services 

Administration (GSA) schedule. 

• When a federal agency bundles contracts, it limits a small business' 

ability to bid for the contract, reduces competition, and leaves the 

taxpayers to pick up the tab for increased costs over time. 

• Size standards are also a very important issue. As you all know, a size 

standard is in most cases the highest gross income a business can have 

and still be considered small. 

o There has been no serious update to size standards in years. We 

need to update them, we can update them, but in a way that 

doesn't harm small businesses. 

• I have heard from a number of small business owners that they have 

waited many months to get paid after they've completed their 

subcontracting work for a prime contractor. 

o Many have also partnered with large businesses to bid on projects 

only to never hear from those large businesses again once the 

contract has been won. 

o I want to know if this is still going on, and if so why, because 

that's just plain unacceptable. 

• And last, many small business owners have expressed their frustration 

that it is tough and expensive to get on the GSA schedule, not to 

mention a nightmare to navigate for a small firm with few resources. 

3 
6 

o They are thrown into a pool with many other businesses, some 

the largest in the world, and they are told "you are on your own." 

That is a problem. 

CONCLUSION 

• As we prepare to reauthorize the contracting provisions of the Small 

Business Act and create legislation to strengthen contracting 

opportunities for small businesses, I look forward to learning your ideas 

on how to fix the problems small businesses are facing in getting 

contracts. 

• The Committee made a good attempt last year to legislate on a number 

of these issues as a part of last year's comprehensive small business 

reauthorization bill, S.2300. 

• Although there were many good provisions in S.2300 last year that I 

supported, we couldn't get them through the Senate. This year we want 

a bill that will move. 

• We are not interested in putting a lot of provisions in a bill that makes 

everyone happy, but cannot get out of the Senate. 

o We are going to do something that is measured and that has a 

chance to succeed. It will not be perfect, but it will be a good 

start. 

• I would also like to learn what positive effects, if any, the Recovery Act 

may be having in expanding access to government contracts. I held a 

hearing on this back in May, but am interested to hear of any progress. 

ROUNDTABLE FORMAT 

• Let me now take a moment to explain the format for the roundtable. 

We've got a large group so if you would please stand your name placard 

up long ways to be recognized to speak. 

4 
7 

• I unfortunately cannot stay due to my schedule, but in my absence Donald 

Cravins and Greg Willis from my staff will moderate and help lead the 

discussion. 

• He will be reporting back to me on the details of the roundtable. 

• We will leave the record open for one week, until September 29th . 

• Before I tum the panel over to Donald and Greg I would like to start off by 

asking the roundtable what their experience has been with respect to 

Recovery Act contracts. It's extremely important for me to hear from you 

about whether you or your members are seeing an increase in federal 

contracts. 

• In about a year most of the stimulus money is scheduled to be spent. It 

will be unacceptable to me if at the end of this time small businesses have 

not significantly benefitted from Recovery Act contracts. 

• I will listen until I need to leave. 

5 
8 

Mr. DRABKIN. Thank you, Senator. I am Dave Drabkin. I am the 

senior procurement executive, the Deputy Chief Acquisition Officer 

and the Deputy Associate Administrator for Acquisition Policy at 

the General Services Administration. 

Chair LANDRIEU. Thank you, Dave, and your nameplate is coming. I am sorry we did not have it ready for you. 

Mr. DRABKIN. That is okay. I prefer to remain anonymous. 

[Laughter.] 

Chair LANDRIEU. That is okay. You can run, but you cannot hide. 

So we are going to get you a nameplate. 

Go ahead, Ann. 

Ms. SULLIVAN. I am Ann Sullivan. I represent Women Impacting 

Public Policy in Washington, as well as many other small businesses. 

Chair LANDRIEU. Thank you. 

Mr. Hesser. 

Mr. HESSER. Bob Hesser. I am a small business owner, but I am 

representing the vet force. 

Chair LANDRIEU. Wonderful. Push the button. 

Ms. DORFMAN. Margot Dorfman, CEO with the U.S. Women’s 

Chamber of Commerce. 

Chair LANDRIEU. Thank you, Margot. 

Mr. CHVOTKIN. Alan Chvotkin, Professional Services Council, a 

trade association representing firms that provide professional and 

technical services to the Federal Government. 

Mr. BRUBECK. Ben Brubeck, Director of Labor and State Affairs 

with Associated Builders and Contractors. We are a construction 

trade association. 

Ms. FINGARSON. Ashley Fingarson, Director of Legislative Affairs, 

Associated Builders and Contractors. 

Mr. WILLIS. Greg Willis, Procurement Counsel for the Senate 

Committee on Small Business and Entrepreneurship. 

Ms. HONTZ. Karen Hontz. I do contracting for Senator Snowe on 

the Small Business Committee. 

Mr. WALKER. I am Matt Walker. I am the Deputy Republican 

Staff Director for the Small Business Committee, and I just want 

to thank the Chair and also explain that Senator Snowe would 

have liked to have been here today. Unfortunately, this conflicts 

with the Finance Committee’s markup of the health care bill, so, 

of course, she had to be there for that. She wanted to send her regrets for not being able to make it and thank everyone for participating today. 

Chair LANDRIEU. And considering there are over 500 amendments pending, I think she would prefer to be there to wade 

through that challenge. 

[Laughter.] 

Mr. REECE. Adam Reece. I am contracting staff for Senator 

Snowe. 

Mr. NEWLAN. Ron Newlan, HUBZone Council, the only national 

trade association focused on the HUBZone program. 

Ms. OLIVER. I am Linda Oliver. I am the Acting Director for the 

Office of Small Business Programs for the Department of Defense. 
9 

Mr. JORDAN. I am Joe Jordan. I am the Associate Administrator 

for Government Contracting and Business Development at the 

Small Business Administration. 

Ms. ROBINSON-BERRY. I am Joan Robinson-Berry. I am the CoChair of TRIAD. That is an organization, a sponsoring organization 

of the aerospace industry that includes primes and small businesses. 

Mr. FERRERA. David Ferrera, Vice President for—— 

Chair LANDRIEU. You need to turn your microphone on and 

speak into the microphone if you would. 

Mr. FERRERA. David Ferrera, Vice President for Government Relations at the U.S. Hispanic Chamber of Commerce. 

Mr. ZEPEDA. Good morning. I am Sam Zepeda, Owner of Vistas 

Construction, a small minority-owned business. 

Chair LANDRIEU. Thank you all so much, and let me also recognize back here against the wall Don Cravins, who is the staff Director of the Small Business Committee. We are happy to have 

Don’s leadership. Thank you, Don, for helping us organize this. 

Let me open it up with some initial comments and questions. The 

way we have normally done this, Greg, is people put their cards up 

like this, if you want to answer a question or comment, and I will 

call on you. 

Let me just begin with the questions here. We want this to be 

very informal, and we have got some follow-up questions from the 

staff. In your opinions that any of you that would like to offer, are 

any of you experiencing in your realm of responsibility the stimulus 

funding or the impacts coming for stimulus funding, either from 

agencies that have more opportunities to contract with small businesses particularly, for companies that you all are representing 

that are attempting to bid on some of these contracts, whether it 

is being successful or not? Are you feeling any immediate impacts 

that you would like to share? 

Robert, we will start with you. And, please, you have got to turn 

your microphone on and speak closely into it. I know it is a little 

awkward, and I am sorry. 

Mr. HESSER. No problem. 

Chair LANDRIEU. Again, we are in a different room. 

Mr. HESSER. Senator, I sent you a letter about 2 weeks ago on 

this subject, maybe 3 weeks ago, and the ARRA—I guess the title 

is—it is the stimulus bill. Throughout the stimulus bill, 457 pages, 

you can find ‘‘8(a)’’ once and you can find ‘‘small business’’ once. 

They are both in the same sentence, and they are in one little subparagraph, and it is only under the broadband. So the only thing 

that the Secretary of Commerce is responsible for considering— 

they must only consider it; they do not have to do anything, just 

if they consider it. There is no small business in the stimulus program, no direction, nothing about anybody. Just one thing, and one 

thing on 8(a). 

We recently went through the broadband first part of grants, and 

one of the problems with a small business, if you have any kind 

of complaint or you think you were shortchanged or whatever it 

might be, there is no way you can do anything about it because the 

grants are not under the procurement, they are not under FAR. 
10 

However, the 2300 bill and many other bills have always put in 

there grants, but the actual legislation is not there to require the 

Government to give an opportunity when there is a complaint or 

something might be going wrong. And we did have some problems 

with this one, the broadband. But the point is no small business 

in 457 pages for $29-some billion. 

Chair LANDRIEU. Okay. Mr. Brubeck. 

Mr. BRUBECK. Yes, I work for ABC, Associated Builders and Contractors. We are a construction trade association. We have a variety of Federal contractors that received contracts from the stimulus 

bill. 

I will reiterate that they are large businesses. We have heard 

from many small businesses who have not had any opportunity to 

participate on the construction projects. 

We are finding that a lot of the projects under the stimulus bill 

are being bid very competitively. The private market right now for 

construction is very weak. There has been quite a bit of job loss. 

About a million jobs in the last 12 months have been lost to the 

industry. 

The stimulus was a welcome investment of cash into public infrastructure, but it has been very competitive, and there is certainly 

not enough work to go around. 

Chair LANDRIEU. Your organization represents large and small 

businesses? 

Mr. BRUBECK. Large and small, subcontractors, general contractors, materials suppliers, and the construction industry. 

Chair LANDRIEU. Okay. Ms. Dorfman. 

Ms. DORFMAN. Thank you, and thank you very much for the invitation to be here today. We represent women-owned firms. We have 

over 500,000 members, but we represent all small businesses. 

We have heard from our constituents that they are not able to 

access the Recovery Act contracts, just as Mr. Brubeck mentioned. 

Additionally, we noted that there was a report that was floated 

out—a press release, actually—last month when Congress was out, 

from the SBA talking about isn’t it wonderful $93 billion in contracting dollars went to small businesses for year ending 2008. 

When we took a deeper look, what we found was women-owned 

firms lost $12 billion of opportunities, and small businesses overall 

lost $30 billion. 

I suspect that what we will see with year ending 2009 is even 

higher because of the increase of dollar coming out from the Federal spending. 

Chair LANDRIEU. Margot, what you are saying—and I think this 

is very important, Ms. Dorfman—is that while the overall number 

went up from $83 billion, I think, to $93 billion, the percentages 

went down. So you are calculating that loss of opportunity between 

what would have been had we hit those higher percentages, the 

numbers that you just gave us? 

Ms. DORFMAN. The Federal spending actually has increased overall, but they did not meet their goals. So that is part of it. 

Chair LANDRIEU. Correct, so it is a lost opportunity between—— 

Ms. DORFMAN. So there are lost opportunities—— 

Chair LANDRIEU [continuing]. What the percentage would have 

been? 
11 

Ms. DORFMAN. Exactly. Additionally, some of the opportunities 

that the SBA has taken off the table for small businesses—for instance, contracting dollars overseas—that type of spending is not 

included in the dollars that should be included. 

Chair LANDRIEU. Okay. Does anyone—go ahead, yes. 

Mr. DRABKIN. Senator, first of all, I would like to make sure that 

the Senator is aware that GSA is the only agency, according to the 

SBA, who met and exceeded all of its goals last year. We are also 

one of the agencies that has one of the larger construction programs under the stimulus package, and we are working very well 

so far at achieving our goals in fiscal year 2009 with the stimulus 

package. 

The only area that we experienced where small business was un- able to play was in the $300-plus million for new cars, because new 

cars are purchased from large companies, and small businesses 

could not play there. 

I would like to observe also that some of the larger projects in 

the construction arena are difficult to reach small businesses 

through because of other issues associated with, for example, their 

ability to get a Miller Act bond at the dollar level required to do 

the work. But we are making up for those where those instances 

occur by increasing subcontracting goals for those prime contractors and ensuring that those prime contractors meet those subcontracting goals under their prime contracts. 

Chair LANDRIEU. Thank you very much for offering that. I would 

only suggest—and I do not have the numbers; maybe some of the 

staff do—that the stimulus funding that went for the Cash for 

Clunkers program, which is part of an extension of the stimulus, 

was very helpful to the dealers, and many of those dealers are 

small businesses. It did not just go to the large companies, but the 

dealers on the ground, and I think we could agree there are many 

small businesses that were dealers. I heard very positive feedback, 

at least from the dealers in Louisiana. I am not sure what other 

people have heard, but it was extremely popular in our state. 

Whether it was effective to meet environmental goals, I am not 

sure, but it was an effective stimulus. 

Mr. DRABKIN. Yes, ma’am. I am talking about a different piece of money. GSA was given a little over $300 million specifically to 

purchase new cars for the Federal fleet. 

Chair LANDRIEU. Oh, I am sorry. Okay. 

Mr. DRABKIN. Those cars have been purchased. They were obviously purchased from a large business. In fact, you will find on 

Federal recovery.gov our list of those cars. I believe there are 

16,000 entries which track each individual car so that we can demonstrate that the car purchased was actually more efficient than 

the car it replaced. 

But my only purpose of reporting that to you is that the only 

area in GSA’s funding where we could not reach directly to small 

businesses was for the cars, because there are no small businesses 

who manufacture cars, and we buy those cars directly from manufacturers. 

Chair LANDRIEU. Thank you very much for meeting your goals 

and for the efforts that GSA is making, and we will come back to 

that. 
12 

Does anybody else want to comment about any stimulus issues 

before we move on to the next set of issues? Go ahead, Mr. Zepeda. 

Mr. ZEPEDA. Yes, well, we believe that the recovery money is 

very welcome into the industry, especially in today’s economic environment. 

I do believe that there are a lot of hurdles through the contracting activity that they are having to overcome, such as the 

spending with small businesses. They are bundling more of the 

contracts. It kind of restricts the access to capital and bonding, restricts us rather than kind of helps us in many ways. But if they 

were to focus more with the SBA in conjunction of obtaining bonding capacity, I think it would kind of help be able to level out the 

playing field a little bit for us and kind of work hand in hand together to get access to those opportunities. 

Chair LANDRIEU. Thank you. 

Mr. Ferrera, and then I will call on you, Mr. Jordan. 

Mr. FERRERA. With the membership of the Hispanic business 

community representing both large and small, the feedback we 

have gotten from the ground is relatively positive, businesses saying they are engaging, that they are putting in requests for proposals and responding to them. 

At the same time, though, one of the primary needs of many of 

the chambers we represent is to try to track the data, how are the 

States actually contracting these dollars since a lot of the dollars 

are being handed out at the local level and the State level. How 

is the data being tracked? And a lot of the Recovery.gov data is 

very macro, a 30,000-foot view. And one of the items that we would 

love to see is for that taxpayer ability to review the small business 

components of these contracting activities. 

In some cases, like the Department of Transportation, they have 

actually threatened, for instance, the State of California to withhold portions of their transportation funds unless they revived 

some of their small business contracting 8(a) programs. But we do 

not know if that is the case for a lot of different States, and we 

do not know how consistent those efforts are being done throughout 

the Federal Government. 

Chair LANDRIEU. Okay. Mr. Jordan, and then Mr. Newlan. 

Mr. JORDAN. Thank you. First, I just wanted to briefly touch 

upon some of the data that I do have, which is regarding the Federal contract dollars. There has been about $13 billion in Federal 

Recovery and Reinvestment Act dollars, contracts that have gone 

out thus far, and about $3 billion of that has gone to small businesses. So when you talk about the goals that several people have 

mentioned, that is running at 23.5 percent, so above the 23-percent 

goal. 

In terms of the subprograms or the socioeconomic groups, the 

HUBZone program, as Mr. Newlan knows, is currently running at 

6.1 percent of stimulus contracts, so $811 million in HUBZone contracts have gone out through the Recovery Act; $1.3 billion in contracts have gone to small disadvantaged businesses, so that is 10.6 

percent, more than double their 5-percent statutory goal. Servicedisabled veterans are at $490 million, so 3.7 percent. And as Ms. 

Dorfman and I are aware, the women-owned small businesses, because there is not yet—and I believe we will touch on this later, 
13 

not yet a set-aside program that contracting officers can utilize for 

women-owned small businesses, they are the one group that is currently below their statutory 5-percent goal, but they are at 3.6 percent with $481 million of Recovery Act contracts. 

So as Mr. Ferrera pointed out, the State portion is still something that we are trying to get the numbers around, but at the 

Federal level I am cautiously optimistic that we are in the right 

place in terms of driving these contracts to small businesses. And 

I just want to briefly touch upon, well, what are we doing 

proactively to ensure that that continues throughout the duration 

of the Recovery Act, and that is where I point to the President and 

Vice President had talked about the Stakeholder Outreach Initiative. This is an effort to really drive contracts to small businesses 

and businesses owned by women, minorities, veterans, people living in impoverished rural or urban areas, to ensure that we both 

help agencies identify qualified small businesses quickly, given the 

rapid period over which these funds are being disbursed, and help 

build capacity and awareness in the small business community. 

Some of the examples of things incorporated into the Stakeholder 

Outreach Initiative are all Federal agencies are tasked with participating and hosting of outreach events. In aggregate, that will be 

over 200 in the 90 days since we began this at the beginning of August. 

The SBA has recently posted on sba.gov a ‘‘How to win Recovery 

Act Federal contracts’’ training. It is a 30-minute, self-directed, totally free training that we are now pushing out to small businesses 

to make sure that they are aware of this resource and can quickly 

get up to speed. 

As Mr. Brubeck said, with some challenges in the commercial 

buying base in many economic sectors, the Government can often 

step in, since it is the largest procurer of goods and services in the 

world, and we want to make sure that small businesses who may 

not have sold to the Government before are capable. 

So I just wanted to point out a few of those things and make sure 

that since we have this opportunity with all these representatives 

of great groups, so you can take some of this information back. 

And, conversely, I am always welcome to discuss more offline. 

Chair LANDRIEU. Thank you, Mr. Jordan, and thank you for your 

emphasis and your effort, and maybe some of the panelists will 

have questions directly to you, which would be appropriate as we 

move forward. 

Mr. Newlan, let me get you. 

Mr. NEWLAN. Thank you, Madam Chair. 

Joe just reported the quantifiable data, more than 6 percent. I 

have inferential data. We ran our national conference a week and 

a half ago here in D.C. where we bring in HUBZone firms from all 

over the Nation, and we had a couple of dozen report to us: ‘‘We 

would love to come, but we are too busy staying home writing orders, bidding jobs and writing orders,’’ including some from Louisiana. And that is the good news. 

Chair LANDRIEU. Good. A little extra to Louisiana. 

[Laughter.] 

And Maine. That is the idea. 
14 

Mr. NEWLAN. Sort of the bad news is about one-third of the land 

mass of Louisiana is today qualified a HUBZone. That has got good 

and bad aspects to it since any firm in those would probably qualify. 

But it looks like HUBZone first at least are out there getting 

more than their 3-percent share and doing well, writing orders, 

bidding jobs. 

Chair LANDRIEU. That is good to know. 

Go ahead, Ann. Ann Sullivan. 

Ms. SULLIVAN. WIPP launched a real effort to try to educate all 

of our members on how to avail themselves of stimulus money, 

and, it is a very detailed briefing. And what we have found is that 

mostly if you have not been a contractor, it is really hard to find 

money. But if you are a successful contractor already, a number of 

our members are having great success because they are already in 

the system. And since the Government is using existing contracts 

to put that stimulus money through, they are having a great deal 

of success. 

So it really varies, I think, by experience of the contractor and 

by how the money is flowing. 

Chair LANDRIEU. Let me ask this to press down a little bit. I was 

reviewing this with my staff in terms of the reporting mechanisms 

for the numbers and percentages of contracts that go to small businesses. 

I am hearing some feedback from small businesses in my state. 

At a reception for the Jefferson Parish Chamber recently, it came 

up with some of my small businesses that said, ‘‘Senator, we are 

part of larger contracts. Our larger contractors contact us to include us as part of their bid. The problem is we never really see 

any of the funding through the contract, but we think that our participation in the bidding of that contract is getting counted towards 

goals achieved.’’ 

Is that your experience? If it is, could you comment about it? 

Could you give some feedback? Ms. Dorfman? 

Ms. DORFMAN. That is a very common complaint with our members. They are asked to provide information like they are going to 

be included in the contract award. They spend a lot of money doing 

that, preparing for the bid, only to find afterwards they never hear 

from the contractor again. And I agree. I think the subcontracting 

plan should also include enforcement of using the small businesses, 

not just saying you have to get information included in the plan. 

Chair LANDRIEU. Mr. Ferrera. 

Mr. FERRERA. Our perspective is that a large number of Federal 

contractors do not generally comply with P.L. 95–507, which requires them to include small and minority businesses in their subcontracting programs. And, generally, when a large contractor puts 

together its bid, gets a lot of bids from small and minority-owned 

businesses, which they need in order to be able to compete it, but 

then generally there is no mechanism in place that requires them 

to use these SDBs once they actually receive the award, and they 

end up recompeting them afterwards. So it becomes almost a bit 

of a bait-and-switch sometimes, and there is nothing to stop them 

from then creating a subdivision within their own private con-
15 

tracting company to carry out what those SDBs or small or minority companies would have done. 

Chair LANDRIEU. Mr. Zepeda. 

Mr. ZEPEDA. Yes, from my own experiences, the process is a bestvalue process that requires a percentage of small and minority 

goals to be included in the proposal when it is submitted. And it 

looks good when the proposal is evaluated, but there is no mechanism in place, such as liquidated damages, that after award it 

could be followed or tracked that, in fact, they are using those goals 

that they submitted at the time of bid. And, unfortunately, you 

know, submitting a proposal does take resources from our company 

where we could be allocating them elsewhere, and it becomes a 

problem for us. 

Chair LANDRIEU. Thank you. I would like to hear from David at 

GSA about this, and then I am going to ask the SBA to comment 

about this particular complaint and what might we do about it. 

Mr. DRABKIN. Senator, you may be aware that I guess now a little over 2 years ago, we put online a new database called ‘‘ESRS.’’ 

ESRS is a database which requires prime contractors to report 

their actual subcontracting performance. 

In the past, the subcontracting performance was reported in 

paper to the various contracting officers. You probably know we 

have about 2,600, give or take 20 or 30, contracting offices spread 

around the world. We do about 11 million contracts each year, 

which means that is 11 million separate contract files into which 

these reports were being put. And by now, going online and having 

prime contractors report their actual performance under their subcontracting plans, we are beginning to gather data that we can use 

to determine whether or not prime contractors are living up to 

their commitments in the contract to achieve a certain level of subcontracting with small businesses. 

I would observe that the Federal Government avoids—we have 

historically avoided—since before the passage of the Armed Services Procurement Act of 1947, we have avoided becoming involved 

in the relationship between prime contractors and subcontracts. 

That is referred to as ‘‘privity.’’ The Government does not want to 

be in a direct relationship with a subcontractor. So who a prime 

contractor negotiates with up front to submit their bid to the Government is less important to us as the purchaser of goods or services than their actual performance after they have received subcontracting—after they have received their prime contract award. 

In fact, one might argue that the whole process of having prime 

contractors what we call ‘‘sub up’’ before they submit a proposal actually gives the Government a sub-optimal proposal, and that it 

might be better if we did not allow them to sub up before they submit a proposal so that after they have won the contract, they can 

go out and put together the best subcontracting team instead of a 

subcontracting team that might have the best in one category, but 

not the best in another. It would serve both the taxpayer and the 

small businesses better. 

But having said all of those things, I believe you will find that 

as ESRS matures—and we are working on its maturation right 

now; you will hear from Mr. Jordan on what they are doing at 

SBA—we should have better and better, more discrete data on 
16 

what is actually being done under prime contracts, and we will be 

able to better and better enforce prime contractors’ responsibilities 

to meet their subcontracting goals because that data will be transparent and readily available not only to the agency’s senior procurement executives responsible for managing that, but also to 

your staff and other people in the oversight community. 

Chair LANDRIEU. Thank you for those comments, and I can appreciate it. I might want to just respectfully argue that it might be 

in the Federal Government’s interest not to get between contractors, large and small; but most certainly, if the Federal Government is going to require, if we are going to require, that a certain 

amount of our goods and services go to small business, then we 

have a vested interest in finding out if that requirement is being 

met. 

So how we do that, whether you say we are getting between contractors or not, or some sort of reporting mechanism, because otherwise it becomes—I do not know—work with no meaning. If you 

are requiring a certain amount of money that we are spending to 

go out to small businesses, but then you accept on face value the 

contracts from larger contractors saying, oh, yes, 20 percent of our 

work is going to small businesses, but then you never check. 

I think that is what we are trying to get to, but I appreciate your 

comments there. 

Mr. DRABKIN. Yes, ma’am. If you do not mind, just to make sure 

we are clear, ESRS allows us to check. When I said we do not get 

between the prime contractors and their subcontractors, that is to 

say, whatever relationships they have and how they establish those 

relationships are between those two individuals. But the prime 

owes us a duty of meeting those subcontracting goals. ESRS is designed to help us make sure that they do what they promised to 

do, which is clearly our responsibility to execute. 

Chair LANDRIEU. Thank you for clarifying that. 

Mr. Chvotkin. 

Mr. CHVOTKIN. Thank you, Senator. Mr. Drabkin is a good 

friend, and he is right on the philosophy, but the fact is that the 

Government is heavily involved in the relationship. There are 

many of the rules you talked about earlier, but the rules that 

apply—and the Government evaluates contractors’ purchasing system methodologies, they question some of the make-buy decisions 

that companies make. They look for the extent of competition in 

the subcontractor arena, and so there is a lot of activities. 

The reporting, as you said, contractors have been reporting on 

performance, and those are monitored by both the small business 

offices as well as contracting officers. More can be done. ESRS is 

one way because it provides an electronic method for matching up 

prime contracts and subcontract awards, and more can be done in 

the enforcement side. We agree with that. 

Your first question was: Is the Government reporting on taking 

credit for work that is not being done? And I do not think that is 

the case because they should be reporting on awards made and not 

simply that a company has proposed a set of small businesses. So 

if they are reporting simply on proposals, you ought to doublecheck with the agencies, but I think they are only reporting on actual awards made. 
17 

Chair LANDRIEU. Let us hear from DOD on that and also from 

Small Business, and then we will get back to others. Ms. Oliver. 

Ms. OLIVER. I am not sure which way to scoot. 

[Laughter.] 

Mr. NEWLAN. Come towards HUBZone. 

Ms. OLIVER. At risk of getting too technical about all this, I am 

afraid we are having some talking past each other, and I do not 

want that to happen, especially with this group, most of whom I 

know, who have such great influence over so many different small 

businesses. 

There is a great deal of confusion about what is in a small business plan and what is in a contract. If it is in a contract, it is probably going to get enforced. If it is not in the contract but, rather, 

in the small business plan—this has been my experience—the 

chances of enforcement seriously diminish, and part of the reason 

is small business performance—it did actually from my standpoint—whatever the small business requirements are in the contract, that is the best place for them to be. And that is in part because when the contracting—whoever the contracting officer is that 

receives—rather, it is the procuring contracting officer or the administrating contracting officer. Small business should not be off to 

the side. It should be just part of the regular review and enforcement. And if it is in the contract, that is the natural way for it to 

go. 

There was a mention earlier about enforcement, liquidated damages. We might as well just be realistic about this. In order to get 

liquidated damages, which I do not know if it has ever happened. 

David, has anybody ever gotten liquidated damages? 

Mr. DRABKIN. Linda, actually there are quite a few contracts— 

not a majority, but particularly large contracts—where failure to 

meet the subcontracting goals has resulted in liquidated damages. 

And, in fact, when I was in the Department of Defense, we had a 

number of those types of contracts. It is not a preferred method because once you get into liquidated damages, your ability to work 

with a prime contractor becomes adversarial, and they begin building their claims files, which is normal in any kind of relationship. 

What we prefer is incentives that are managed well, and, unfortunately, Senator, as you know, you have heard about how incentives have not been managed well. But when I was on the Pentagon renovation, we managed our incentives on small business 

participation every month, and they either performed and they got 

an incentive, or they did not perform and we took that incentive 

away. 

When managed well, it works great, but when you manage 11 

million contracts across the Government, with only 27,000, 28,000 

people to manage those contracts, your ability to manage incentives 

on each and every contract on a quarterly or even semi-annual 

basis, it is very difficult 

Ms. OLIVER. I agree with everything—— 

Chair LANDRIEU. Go ahead and finish, and then I am going to 

get to Ms. Berry. Go ahead. 

Ms. OLIVER. I agree with everything that you have said, David, 

except the difficulty of proving liquidated damages. You—— 
18 

Chair LANDRIEU. Can you all hear in the back? Okay. Could you 

speak—I am sorry. You just have to lean up to the microphone. 

Ms. OLIVER. I will try to yell. 

What I want us to stay focused on is what works the best, just 

as a practical matter, and that is having the part of the contract— 

David is very knowledgeable. I just never—although I spent most 

of my life worrying about Government contracts, I have never seen 

liquidated damages work. It is too hard to prove, and it becomes— 

there are a lot of reasons. But liquidated damages are a product 

of having something be in the subcontracting plan, not in the contract. If you do not perform—if it is in the contract and you do not 

perform—— 

Chair LANDRIEU. Correct. Being in the contract, there is an enforcement mechanism that is easily understood. 

Ms. OLIVER. Exactly. 

Chair LANDRIEU. So that is very good, and thank you for clarifying that. 

Ms. Robinson-Berry. 

Ms. ROBINSON-BERRY. Yes, I represent a lot of—can you hear? 

Chair LANDRIEU. Yours is not—okay, try it now. 

Ms. ROBINSON-BERRY. I am representing a lot of the primes, and 

I think there is a lack of communication. Folks assume that after 

you win a contract the construct of that contract is the same. You 

come in with a great RFP and you win that contract, and by the 

time it is awarded, it is a totally different plan. And we do not always effectively communicate that change in that contracting 

scope. And so some small businesses believe that they were bamboozled. But, again, it is phased over a longer period or they slow 

it down or they change the content. So I think that that is what 

we can work on to make sure that we communicate effectively to 

all the small businesses of the actual award. 

The second point is that we also—our members do get evaluated 

every year. There is very, very rigorous audits—we call them 640 

audits—every year on our performance, and we get a report card. 

And if that report card is not good, it affects our performance. And 

when you are going after new activities, they ask for your past performance. And when you are competing, when you look at the past 

performance and all of the technical requirements are there, I 

know that a lot of our contracting officers look at that past performance and then we are impacted. 

And, again, many of our contracts, also our small business goals 

are tied to the contract, and if we do not perform in all areas, it 

affects our award fee. So I think that a lot of that information on 

our report card and the actual winner of the contracts is not always communicated clearly. So I just wanted to go on record that 

that does, in fact, happen. 

Chair LANDRIEU. Mr. Hesser has had his banner up for a while, 

and then Mr. Newlan, and then we are going to move on to another 

issue or two. 

Mr. HESSER. I want to make two comments. My first one was 

with Mr. Jordan. The vet forces found many—questioned several of 

the statistics that come out, and we seem to be right most of the 

time, because how was all these funds that you said for 8(a)s, for 

SDBs, for women-owned, how was each one of those awarded? And 
19 

that is a big question, because when—the very first time in 1998 

or 1999 through 2001 to 2002, service-disabled veterans—what was 

being counted was they were finding an 8(a) who was also a service-disabled veteran. They were awarding it as an 8(a) contract. 

But then they would count service-disabled veterans and 8(a)s. A 

fact. We have testified about four or five times in front of the 

House or Senate about this subject. 

Now what they do is they have the same ability, but if it is easier to give an 8(a) contract, which it always is, they will give an 8(a) 

contract, and if you are also a service-disabled veteran, you have 

got it made because they really want you. And they will give you 

two counts. 

Some people say, well, they do not count it twice. Well, they do, 

in fact, count it twice in a roundabout way. Sometimes they do only 

report it once. For instance, if the service-disabled veteran goal is 

not doing very well, they will count it over on this side. But what 

is important that the vet force is very, very serious about, we do 

not want a contract awarded as a service-disabled veteran—I am 

sorry, as an 8(a). We want it as a service-disabled veteran because 

the law protects the 8(a), the law protects service-disabled vet, the 

law protects HUBZone, et cetera. That is what it should be and 

only be that. That is number one. 

Number two, accounts have not been brought up here about the 

subcontracting contracting is—frequently, an 8(a) will get a contract, and they will share that with a large business. Or they will 

do it all by themselves. But as time goes by, the original seven people that they had in 3 years is about 21 people. So the contracting 

officer follows the ‘‘once an 8(a), always an 8(a)’’ rule. But the point 

in the law, as I understand it—and we have had this kind of researched out. The point in time when the award was made, that 

is what the SBA Small Business Act protected. They protected the 

competition for them to win seven, only seven. Now, in 3 years, 

when it grows up to 21, they should only award the seven as an 

8(a) and break the other one, the other 14 back out. Or take the 

whole contract and put it out either women-owned, but somebody 

different other than 8(a), because it keeps hanging in there all the 

time. I do not know if the HUBZone runs into that. I know I do. 

It is 8(a), 8(a), 8(a). I am not against the program. I love it. I have 

run four 8(a) companies. So I am not against it. I am only saying 

the way it is being done. 

Chair LANDRIEU. Okay. Thank you. 

Mr. Newlan. And then, Mr. Jordan, you may want to comment. 

Mr. NEWLAN. Madam Chair, as the Nation prepares to attempt 

to prevent the H1N1 flu epidemic this fall, we have an epidemic 

right now in the topic you asked the question about. Small businesses are getting the raw end of the deal by large businesses 

every day nationwide, and have for 30 years, and I speak with 

firsthand experience running small businesses and large businesses. 

If this Committee wanted to step in, this Committee would be 

recognized for the work that it did in that area. It is a tremendously important area to improving small business contracting. 

One quick example. As I understand it, the Federal Government 

contracting officer cannot make an award to a prime without put-
20 

ting some money in the contract. You cannot make an empty, hollow award. There is usually at least $5,000 or $50,000 put on this 

billion-dollar contract because it consummates the contract. There 

is a transference of cash. But the small businesses help the big 

business win. We do a lot of work, we do a lot of writing, and all 

we get is a promise that downstream maybe. 

Perhaps the same concept could be applied where the prime contract cannot mention in their proposal anything that they are not 

prepared to pay for and put up real money to a small business to 

help write the winning proposal. 

That is what hurts the most. These small businesses spend 

$10,000, $20,000, $50,000 of their own time and energy to help a 

big business win. Big business wins, then they never talk. But if 

we got paid that $50,000, it would not be quite as big a complaint 

because we got paid for at least the work we did. 

Chair LANDRIEU. Thank you, Mr. Newlan. I am glad someone on 

this panel is more articulate than I have managed to be. That was 

very good. Thank you very much. 

Mr. NEWLAN. I have got 30 years’ experience. 

Chair LANDRIEU. Thank you, Mr. Newlan. 

Mr. Jordan. 

Mr. JORDAN. I cannot promise to be articulate, but I will address 

the issue. 

[Laughter.] 

Bait and switch, especially when it comes to subcontracting 

plans, is certainly something that we are concerned about that is 

frequently raised to us typically through our procurement center 

representatives or in our district offices, and it is something that 

we work very hard to help address. So what are the actions that 

back up those words? 

I think, you know, from our standpoint there are two main arenas in which we can effect some change here, and one is working 

collaboratively with the agencies, so this is both through our effort 

with the various OSDBUs and other small business people within 

the agencies, as well as the contracting officers and our procurement center representatives who work with those contracting officers and sit at those buying activities and look over many of these 

contracts. And with the larger primes, it is making sure that you 

have a dialogue with groups such as TRIAD. Ms. Oliver and I just 

recently went down to Fort Worth, Texas, and met with the Lockheed Martin team working on the F–35 to talk about: Okay, as this 

ramps up, what are your small business contract plans? We are 

going to hold you to what you say, so do not make these empty 

promises, as you put it. 

That is where the second level is, almost a trust but verify sense, 

using the electronic subcontract reporting system to ensure that 

primes are following through on the allocations that they have 

signed up to do, and with the agencies conducting things like surveillance reviews where we can evaluate the performance around 

that. 

So we certainly hear it anecdotally as well, but we are also trying 

to put the data against it and marshal our resources to ensure that 

in a collaborative but enforceable way we can address this issue. 
21 

Chair LANDRIEU. Thank you for taking those extra steps. I am 

going to have to step out and turn the microphone over to Don 

Cravins, the Staff Director of our Committee, and he is going to be 

joined by able assistants on both the Republican and Democratic 

side to continue the questions. 

This record will stay open for 2 weeks after today. This meeting 

will go on probably until 11:30, quarter to 12:00. So thank you all. 

It has been very informative, and I am just going to have to slip 

out for another engagement but the roundtable will continue. 

Thank you all very, very much for participating, and I am going 

to turn the questions over to Don now. Thank you. 

Mr. CRAVINS. All right. Thank you, Senator Landrieu. 

At this time I am going to ask my colleagues, my able colleagues 

from Senator Snowe’s staff, to ask the next question. 

Ms. HONTZ. Thank you, Don. 

Well, you see we have sort of skipped around. We had an agenda, 

but it is hard to stay on the agenda because all these issues somewhat intertwine. Before I begin the questioning, I want to thank 

all of the panelists for showing up. I think in the discussion already we have learned a lot, and it will be helpful as we progress 

in trying to improve small business contracting. 

I want to go back to the goaling for a minute. I know there are 

other things that we need to cover, such as size standards and 

some of the individual programs. But I think it is important because obviously Senator Snowe is very upset every time she sees 

a report coming out that says the governmentwide goals were not 

met. 

The question is—well, there are lots of questions, but the law 

states that it is maximum practical extent—practicable, I guess, 

which is a very hard word to say, but I want to discuss that a little 

bit. 

For example, congratulations, GSA, on meeting all your goals. 

Unfortunately, DOD, which is 75 percent of the buy, is not quite 

in that situation—not that they have not tried. I have been working with Linda for a long time on this issue, and I know she is passionate about it, as are her staff across the world, really. 

But, for example, now in the Recovery Act, if you look at the statistics, I believe DOD is 56 percent and GSA is 8 percent. And, Mr. 

Drabkin, you said you were buying a lot of cars, and you buy them 

from large manufacturers, and that was what some of your money 

in the stimulus bill was. I think for DOD it was construction, and, 

of course, small businesses do well in construction. 

So I am going to throw out a couple of things here: one, the maximum practicable extent and some discussion on that; and then related to that is this Small Business Demonstration Act, Comp. 

Demonstration Act, which limits in certain fields that small businesses seem to exceed in that they cannot have set-asides. This has 

been on the books since 1988, and I am wondering if maybe it is 

time to look at it and see if this is prohibiting small businesses 

from getting contracts through set-asides. 

Anyone care to comment? 

Mr. DRABKIN. Well, a couple of points. When you look at the 

stimulus money alone and you look at what GSA is required to do 

with that money, there are a couple of points that become obvious. 
22 

And this is a difficulty, by the way, with small business goaling 

generally. You have to look to the marketplace to who is capable 

of performing the particular work that needs to be done. 

So, for example, if we are building a several-hundred-million-dollar courthouse—we build those—finding a small business that can 

get a Miller Act bond for—well, first of all, there are not severalhundred-million-dollar Miller Act bonds available. You cannot get 

them. And they have to be bonded to do the work, and so small 

businesses in those circumstances are excluded from the market 

that we can go to to purchase that service. So we have to redouble 

our efforts in other areas to try to make up for those goals. 

This is just like when I was in DOD. There is no small business 

that builds a fighter aircraft or an aircraft carrier or, for that matter, a tank. And so when you get to large construction projects— 

and GSA’s dollars were almost $6 billion total—5.8, I think—5.5 for 

building and construction, $300 million or so for cars. Cars cannot 

be bought from small businesses for that entire $300 million—there 

was nothing we could do to reach out to small business as part of 

that $300 million. 

Of the 5.8, you are correct that our recent report shows that 

overall of the 1.3 that we have obligated in accordance with our 

goals for obligating ARRA money, only 8 percent so far has gone 

to small businesses. When you look at the projects that were 

awarded, you will observe that where they could go to small businesses, they did. Where they could not because of the size of the 

project or inability for the people to compete, in accordance with 

the rules that Congress has set up, they did not go to small businesses. 

If you look at our subcontracting goals in those projects, you will 

notice that they are very aggressive; in many cases 50 percent of 

the project is laid out. And unlike other agencies, we in GSA—and 

this is not to make negative remarks about other agencies, but we 

manage aggressively the performance of the subcontracting goals 

by our prime contractors to make sure that they meet them. 

But this is a general observation about small business goaling altogether, and it is one which you did not ask, but you opened the 

door. As you look at the marketplace today, what you have to 

evaluate is where are small businesses that can perform in accordance with the rules that we have set for small business performance. And I think you will find that the market has changed dramatically, and so finding a small business that can deliver a small 

business-manufactured IT product is awfully hard to do because 

nobody manufactures IT products in the United States at all. And 

we buy a lot of IT. 

And you have a rule—remember, we have a rule—that says that 

small business, to be a small business for goaling purposes, has to 

either manufacture the product itself or sell the product of another 

small business. Now, I know SBA was considering changing that 

rule, but that is still the rule. 

In the services world, you have the same rule. A small business 

to be counted for goaling purposes as a small business has to offer 

the services, at least 50 percent of the services as a small business. 

And so I guess my point is what we have never done, as far as I 

know, is do a complete market analysis of where it is appropriate— 
23 

where there are small businesses available to do the work, who can 

follow the rules that have been set by Congress in the statute, and 

then set our goals based upon those numbers, as opposed to trying 

to take a salami-cut approach to the total number of dollars we 

spent. 

And, believe me, I am committed and everybody in GSA is committed to small businesses. We want to do business with small 

businesses. As you know, we are the only ones, the only agency 

with a small business GWAC for 8(a)s, which we are recompeting. 

We are the only one with a service-disabled-veteran-owned small 

business GWAC. We are the only ones with a HUBZone small business GWAC. We are the only who created a GWAC just for small 

businesses in Alliant. We are committed to small businesses. But 

we have a difficulty achieving those goals when they are spread 

across an entire marketplace where small businesses cannot compete. 

Ms. HONTZ. Okay. Thank you very much for those comments. 

Mr. WILLIS. Can I follow up really briefly? 

Ms. HONTZ. Yes. 

Mr. WILLIS. What I am hearing is because it is difficult we 

should abrogate our responsibility to do it. 

Mr. DRABKIN. That is not what you are hearing. What I am talking about—— 

Mr. WILLIS. That was the long answer. 

Mr. DRABKIN [continuing]. Is impossibility. That is not the answer I gave you, sir. The answer I gave you was—— 

Mr. WILLIS. You are saying it is impossible for small business—— 

Mr. DRABKIN [continuing]. If there is no small business capable 

of doing the work, then having a goal in that particular part of the 

market makes no sense. 

Mr. WILLIS [continuing]. Abrogate the agency’s goal to meet 

small business goals generally. You might have to work harder in 

another area. 

Mr. DRABKIN. That is true. 

Mr. WILLIS. But it does not relieve you of the responsibility—— 

Mr. DRABKIN. And I did not say it did. 

Mr. WILLIS [continuing]. To meet the goal. I am not saying you 

did. 

Mr. DRABKIN. Actually, you did say—— 

Mr. WILLIS. But what I am saying is if you are saying that, that 

is a wrong assertion. That is exactly what I heard. But if you are 

telling me that that is not what you are saying, then I will accept—— 

Mr. DRABKIN. Not what I am saying at all. 

Mr. WILLIS. But—— 

Mr. DRABKIN. What I am saying is we need to do an analysis—— 

Mr. WILLIS. Excuse me—— 

Mr. DRABKIN [continuing]. Of the marketplace—— 

Mr. WILLIS. Excuse me. What I am telling you is the fact that 

it is hard does not relieve you of the responsibility to meet the goal. 

Mr. DRABKIN. And we did. And what I am telling you, sir, is 

that—— 

Mr. WILLIS. Let us move on. 
24 

Mr. DRABKIN [continuing]. Our obligation is—— 

Mr. WILLIS. Let us move on from there. Karen. 

Ms. HONTZ. Okay. Can I have DOD—and, you know, this discussion could go on forever, but we have a lot to talk about, so if you 

could keep your remarks somewhat short. Linda. 

Ms. OLIVER. Well, I just almost do not know where to go there. 

There is so much material here. 

The Senator mentioned very early on and Karen just re-mentioned that what the law requires is maximum practicable opportunity. And that is what is reflected in the Federal Acquisition 

Regulation. And that is what we need to keep our eye on, and one 

way we have tried to keep our eye on that is to begin to do exactly 

what David Drabkin just said we should be doing, which is to do 

more and more analysis. 

Now, we are nowhere near the stage that you are speaking of, 

David. We are working on it all the time, and we are getting better. If we understand our data well enough, it seems to me like we 

should be able to—I am sure you do not want a big technical explanation of why I think this, but we should be able to say—in my 

office, for example, we should be able to say, Department of the 

Navy, you are buying this, there are other parts—and you are not 

buying much of it from small businesses. We can look at the data 

and see that there are—I do not know, Justice Department is buying from small businesses. You need to focus. 

That is where we need to go with the data. But it is always maximum practicable opportunity. I am here to tell you, the Army does 

not get by with 23 percent because of what they buy. And David 

is correct. You know, no small businesses make fighter planes or 

combat ships or all sorts of systems, and Greg is right, that is what 

David did say. That means we have to focus on the other thing. 

But David has the key, and it is really where we are trying to go, 

is to keep on the maximum practicable opportunity so that we find 

what is possible, because it does not help any for me to say, 

NAVAIR, why aren’t you buying more jets from small business? 

They cannot get there. 

Ms. HONTZ. Do you want to comment? 

Mr. WILLIS. I think what we are saying is do whatever you need 

to do internally to meet your goals. We are not going to micromanage how you manage your work flow. But the goal is what it 

is. And I think it sounds like you are stepping back from wanting 

to meet that goal because it is difficult. The goal—— 

Ms. OLIVER. I am sorry. It comes across that way. And, actually, 

this is not—I think you are probably right that I sound—because 

I am somebody who tends to see problems. I agree that it probably 

sounds like I am stepping back. I am not, not intending to. I think 

Margot and Bob and I have all had this discussion at one time or 

another. We are not stepping back. 

But if we do not look at the problem, if we do not try to analyze 

where the possibilities are, if we use our limited resources to beat 

up parts of the Department of Defense who cannot do otherwise, 

it is just—it does not help anything. 

Mr. WILLIS. I do not want to step on Karen’s—— 

[Laughter.] 

Ms. HONTZ. That is all right. Joan. 
25 

Ms. ROBINSON-BERRY. Yes, I agree with both Linda and David 

that it is a real challenge from our industry—this one does not 

work. Sorry. We are all sharing one. 

Mr. JORDAN. That is all right. I am good at sharing. 

Ms. ROBINSON-BERRY. I agree with both Linda Oliver and David. 

It is a challenge, especially in a high-tech arena. But I agree with 

you. We cannot stop. We have got to find creative ways to expand 

the pool of qualified technical small businesses, and we really, really embrace the SBIR program that is designed to help small business go after high-technology fields. But we do not have the—the 

pool is not there. We have done the analysis, and industry and a 

lot of our partners have. But it goes to your point. We have got to 

find a way. 

And I believe if we try to integrate some of the very successful 

SBA and other programs like SBIR—that is, small innovative research projects—as well as mentor-protege, and align them with 

universities, maybe one day we can have a car manufacturer or 

have more of our small businesses in technology so that we can 

take advantage of that. But it takes a more integrated effort where 

small businesses have to understand the technology road map for 

DOD and be willing to make the investment in those areas. In that 

comes the challenge. When you have a personal net worth of 

$750,000 for small disadvantaged businesses, how practical is it 

going to be for them to be able to compete in the high-tech arena? 

But both sides are right. We need to do more. We never need— 

we cannot give up. But we have to be realistic about the real art 

of the possible. 

Ms. HONTZ. I know others have had their signs up, but in the 

interest—and I remind you that you can always submit for the 

record up to 2 weeks. If you do not mind, I will turn it back over 

to Greg, and maybe in the course of the next questioning, you can 

get in what you wanted to say. 

Greg. 

Mr. WILLIS. Thanks, Karen. 

I am going to try to move a little quickly now. We are kind of 

running out of time, and we have a number of topics that we need 

to cover quickly. 

The first thing I wanted to kind of ask the participants here— 

and I especially want to hear from the small businesses and those 

who represent small businesses. There is this challenge with bundling, and we have spoken a little bit about that, but I want to talk 

a little bit about what we can do in terms of policy to make it easier for small businesses to get at larger procurements, i.e., teaming, 

joint ventures. What structurally prohibits small businesses from 

doing joint ventures, from teaming? And what can we do to kind 

of change that environment? 

Mr. HESSER. I can comment on the joint ventures. That happened a lot during the vets’ GWAC and veterans trying to get joint 

ventures. 8(a)s and HUBZones—I know 8(a)s—you may correct me. 

I think HUBZone also has to have SBA’s approval for a joint venture. I know that 8(a)s do. On service-disabled veterans, we do not 

have to have that, and that is a very good thing. And I was part 

of the discussions of getting the law together to do that. So that 

is one thing. Joint ventures should be between two companies. 
26 

They have a responsibility. They report to the Government. They 

say, ‘‘We can do this. Here is our joint venture.’’ They can do it. 

If it is a HUBZone, it is 51 percent or whoever—whatever it has 

to be, they are the ones responsible for making that response to the 

government, say, ‘‘We did that.’’ They raise their hand—or whatever they do, they sign it and say that is it. It used to be that way 

years ago. You do not put so much requirements on that small 

business just to win the award. That is one thing I know I have 

run into. That was just joint venture. 

Mr. WILLIS. David. 

Mr. FERRERA. It is funny you should bring up the question of 

joint ventures since we have been approached by—many of our 

companies that we represent have been approached by folks from 

a particular State trying to get into joint ventures, but never mind 

that gets us into an entirely different issue. 

Now, one of the things that we would propose, actually, outside 

of the joint venture issue, is the expanded use of two plus two 

could be very useful towards—getting towards the issue of breaking—forcing procurement officers to start redirecting a lot of contracts that could be used by—that could be awarded. It is already 

in the law. And if there is any way that we can find ways to expand the enforcement and the use of two plus two, that would be 

very useful. That is about the one comment there. 

Also, to say that Chairwoman Velasquez and several folks in the 

other chamber, of course, you know, not to say that they would 

ever draft anything a little better, but I think a lot of inspiration 

can be taken from the contracting reform bill and the contract 

debundling provisions that they wrote into the bill that they 

passed. 

Mr. WILLIS. Mr. Zepeda. 

Mr. ZEPEDA. Yes, first of all, I think that as I climb the ladder 

from getting from one year’s revenue to the next year’s revenue, I 

think we always run into the challenge of the capacity both with 

bonding and capital, and they are always very restrictive of what 

we can and cannot do. We have options such as partnerships, mentor-proteges and others that we mentioned here. 

I think that probably the one solution that we could think of 

would be a partnership maybe with the SBA as well as a large 

company that kind of becomes the mentor in between and the large 

company that would facilitate or alleviate the bonding headache on 

the overall project requirement or a portion of the requirement. I 

think that in itself would be a big restriction that you would overcome. 

I think others that we probably would be dealing with is the past 

performance. Every contracting officer has at his disposal discretionary issues of past performance. If you have not done it before, 

there is no past performance that you could offer to an agency. So 

it is climbing the ladder type attitude that how do we get to the 

next level if you have—or go to Lockheed or go to one of the larger 

companies, more than likely they are not going to want to allocate 

resources for a smaller project. The mentor-protege gives you that 

or affords you that opportunity. But if we look at the historical statistics of the mentor-protege, it has not been very successful, and 
27 

it does continue to be a hassle for all of us in trying to go to the 

next project. 

Thank you. 

Mr. WILLIS. Ms. Dorfman. 

Ms. DORFMAN. I have a statistic here. The top 100 contractors 

were awarded about 60 percent of all Federal spending in 2008; 

200,000 contractors were remaining in the rest of that portion. I 

think bundling is a big issue. I am not sure that just having 

teaming will work. I know that in some instances it is a very good 

tool. We encourage, especially with the women’s program not there, 

we encourage our members to try and team to access these contracts. But I think that we have a much bigger issue on hand. 

One of the thoughts I had was if you take a look at the Department of Defense, with the large contracts, the other thing that we 

are seeing is the majority of contracts are centered in four States— 

Virginia, Texas, California, and Maryland—which says to me that 

these contracts, while there are bases all over the place, there are 

less and less contracts going to the local community because they 

are getting bundled in. 

So I think there are some areas where we can take a look and 

identify where we can pull some of the contracts apart, and with 

that I say we need to put more money into the SBA and get the 

PCRs in place to handle the situation. 

Mr. WILLIS. I think we need to move briefly on because we need 

to—— 

Ms. HONTZ. Okay. 

Mr. WILLIS. It is a similar topic, but we have heard a number 

of different opinions about the relative size standards that are currently in place. We have over the last two Congresses heard SBA 

comment about how they are going to update those size standards 

at some point. And so, first of all, I want to hear whether or not 

size standards need to be increased, decreased, what the opinion is, 

and also whether or not SBA intends to update those size standards in my lifetime. 

[Laughter.] 

Mr. JORDAN. How long are you going to live, Greg? 

Mr. WILLIS. Beyond tomorrow, with the Lord’s help. 

[Laughter.] 

Ann. 

Ms. SULLIVAN. I would just like to point out that while I think 

everybody kind of thinks that the size standards need to be updated, the consequences to small business are just enormous, because small businesses are basing their next 5 years on the current 

size standards. So every time this issue comes up before WIPP 

members, it is with great trepidation that they think about an update in the standards just simply because it could completely 

change their business plan. So I would just say that if you are 

going to do that, you need some kind of phase-in. You would need 

some kind of way to accommodate the change. That is what they 

struggle with. 

Mr. WILLIS. Alan. 

Mr. CHVOTKIN. The current size standards are out of date. They 

need to be updated. They are woefully undersized—pardon that expression—for the Federal procurement marketplace. So there are 
28 

actually two other things that need to be done. My own view and 

the Professional Services Council, the recommendation is that we 

go back to a separate size standard for Federal procurement. The 

size standards are actually suppressed when you look at—because 

of the standard used to establish them, which is where 95 percent 

of the businesses are in the economy as a whole, that the requirements that the Senator talked about, some of the statutory requirements, the unique burdens, says that the SBA ought to take a look 

at what it takes to do business in the Federal procurement marketplace, which is different than what it takes to be a small business 

in the regular marketplace. 

Secondly, the size standards are based on the NAICS codes, 

which are really a manufacturing base. The preponderance of Federal spending over time is on services, and while we cannot change 

the NAICS codes—it would take a papal dispensation to do that— 

we ought to take a look at whether there are other measures that 

can be used to help the Federal procurement agencies particularly 

when they are trying to acquire services. That is where the marketplace has been in the last 5 or 6 years. It is clearly where the marketplace is going in the next 5 to 6 years. And we see a lot of effort 

at trying to squeeze procurement opportunities into the existing 

NAICS code standards, which really are manufacturing—in many 

cases are manufacturing or an antiquated basis for describing the 

work that is actually being done today. 

Mr. WILLIS. Mr. Jordan. 

Mr. JORDAN. Sure. You know, one of the biggest challenges I face 

is that when people ask me, okay, so what is a small business, the 

answer takes about 10 minutes. 

The confusion around size standards is something that we certainly feel, and there is also—it is not as cut and dried, as Ann 

said. Even increasing a size standard can have a negative impact 

on a certain sector of small businesses, so as often as I hear the 

size standards need to be raised so that we can effectively grow 

and hire and create jobs, I frequently hear from businesses just 

starting, if you raise them, you are creating even within this protected environment an unfair competitive situation where we cannot possibly ever grow, and all you are doing is perpetuating the 

exact same set of ‘‘small businesses,’’ without really letting them 

graduate and then letting us climb the ladder as well. So there are 

certainly many sides to this issue, and I hear them all quite frequently. 

But to your point about what are we doing about it, we are conducting a comprehensive size review, so looking at all the different 

standards. We have recently gotten, with the Department of Defense’s help, a whole bunch of data from GSA that we can use to 

analyze historical trends, which industries are growing, as was 

mentioned, utilizing the North American Industry Classification 

System, for both manufactured goods and services, to look at where 

those standards should be, and we have a methodology that we 

have been using—that we have been applying to this review, and 

w hope to have both that methodology and the first few industries 

to which that methodology was applied in a size standard review 

out for public comment in the near future, sometime between tomorrow and the end of Greg’s long life. 
29 

[Laughter.] 

Mr. CRAVINS. Seriously, Joe, when? I mean—— 

Mr. JORDAN. I cannot promise a time, but they are in an internal 

review right now, and we really do hope to have them out in the 

near future, both the methodology and then the first few size 

standards, so that we can receive the many public comments that 

we would anticipate, incorporate—or make any changes based on 

those comments that, you know, are deemed appropriate, and then 

resubmit them for final clearance and publish them. Then that will 

set the tone for the process that we will undergo as we review all 

of the various industries for both manufactured products and services, not just manufactured goods. 

Mr. WILLIS. This is the challenge that we have, and Don brought 

it home with what he asked. We have been promised these updates 

for—I have been on the Committee 3 years. We have been promised them for the 3 years, and I have been told that we have been 

promised them since before then. And people are anxious because 

they are managing up or down their work flow. That is probably 

the last thing we need right now in this economy, is people managing down their opportunities. 

Mr. JORDAN. Sure. And I would just say that since this administration has been in, it has only been a short period of time, and 

while, you know, you have had to deal with many frustrations on 

many issues for quite some time, several of these issues did not 

crop up overnight. Some of the problems and concerns are not 

brand-new. 

However, in a short period of time, I am proud of the progress 

that we have made against things like conducting the size standards review. We are working on—I know it is an agenda item for 

later, but working on the women’s procurement rule that I know 

is a concern of this Committee and has been for some time. Mr. 

Newlan and the HUBZone folks are well aware of the progress we 

have tried to make in addressing that program. 

And so I do fully anticipate being held accountable for delivering 

the actual results, not just the promises, but I would encourage you 

to look at what we have done thus far. 

Mr. WILLIS. Well, that is a good segue to the women’s procurement rule. Obviously—what are we on? Year 9, give or take, of 

waiting for implementation of the women’s procurement program. 

And we had some challenges last Congress that we hopefully 

worked through to get to this point. So I want to hear from those 

who represent women-owned businesses, owners, about where we 

are, where we should be going forward. So we will start with Margot and then Ann. 

Ms. DORFMAN. Thank you. Again, obviously it is needed. A statistic: a $300 billion increase in Federal spending since 2001, but 

the increase for women-owned firms was only $6.5 billion. We have 

been consistently losing about $6 billion annually until 2008 where 

it jumped up to $12 billion. I suspect that in 2009, which is coming 

up in a few days, we will see that increase even further because 

of the recovery money that has been put into the economy. 

I have heard a lot of folks say, well, an answer would be to get 

more women-owned firms registered in CCR. There are currently 

75,000 registered in CCR. Only 26,000 of them have contracts. I 
30 

have heard from numerous women-owned firms that there is no 

point for them to register because they do not have access to these 

contracts until the women’s program has been implemented. We 

are seeing that that—this is like the number one thing that needs 

to be done. July 24th was our last status hearing with the court, 

and the SBA and the U.S. Women’s Chamber filed a motion to stay 

so that we could hopefully work through this process. And there is 

work in the background and I keep—I am anxious, too. When will 

it happen? 

Thank you. 

Mr. WILLIS. Ann. 

Ms. SULLIVAN. We believe that it is absolutely critical that this 

is put in place by the end of the year. And I know that is ambitious, but I know that your General Counsel is very ambitious, so— 

because of the stimulus dollars. Without that program, you know, 

we are just going to keep on losing many more opportunities than 

otherwise we would. 

We need the program in place. We know that is ambitious. We 

will help you in any way when it comes to maybe shortening the 

review periods to get it into place. I think we have waited long 

enough, so, you know, I do not think there is a lot more that people 

have to add to your bank of knowledge to be able to put it in place. 

One of the things that WIPP did was, when we saw that there 

were only 55,000 women registered in the CCR, when the RAND 

study came out, I mean, the first no-brainer was, well, you better 

increase people registering on CCR. And as Margot said, there are 

now 75,000. 

We did a major push with American Express—it is called ‘‘Give 

Me Five’’—where we have a very ambitious program to get every 

woman we basically meet registered on the CCR so that they will 

be counted in your statistics. 

We urge the SBA to take the interpretation from the RAND 

study, since that is the study that you have right now, to include 

industries up to 87 percent rather than the four little industries 

that the last administration put in place. 

And we appreciate the support of this administration to put this 

program into place. The President is on record as saying that. So 

we look forward to an expeditious program. 

Mr. WILLIS. Joe. 

Mr. JORDAN. Yes, absolutely. As Margot and Ann know, we are 

working quite hard on this. There were some challenges presented 

by the fact that the RAND study was conducted in the past, and 

we are working through a number of those, and the various legal 

challenges, as Ms. Sullivan alluded to, our General Counsel has 

been leading this effort because this is absolutely a top priority to 

the Administrator to get a rule out there quickly. 

You know, I hear all the time—I am a metrics person, and as I 

am quoting various statistics, I always have to put the little asterisk in there, well, but the women-owned small business number, 

you know, there is not a lot that contracting officers can do about 

it because there is no tool in place. And they say, Oh, well, what 

are you doing about that? 
31 

So we hope to have—we have made a lot of progress in the last 

few months, and we hope to have, again, something out there, you 

know, quite quickly. 

Mr. WILLIS. With that, Karen. 

Ms. HONTZ. I am going to turn it over to Matt. 

Mr. WALKER. Let me just add to that that Senator Snowe as well 

is very interested and concerned with having the women’s contracting program up and in place, and it is a high priority for her. 

I would like to shift briefly to the HUBZone program. The 

HUBZone program, of course, is a critical program. It helps individuals in economically distressed communities. There were some 

GAO reports—in fact, there were three of them of late that were 

critical of the program, found problems with fraud, the monitoring 

system that was in place at the SBA and others. And, unfortunately, there are those who would try to destroy the program or 

use that against the program to try to do something detrimental 

to it. And we are strong proponents—by ‘‘we,’’ I mean Senator 

Snowe as well as other Republicans on the Committee—of trying 

to support this program. She thinks that it is a critical program 

that does a lot of great work, and that none of the programs are 

immune to problems. There have certainly been problems with 

each individual program, and that the proper measure to take 

place is to try to fix the programs that continue to do great things. 

We were fortunate enough to recently speak with Mr. Jordan 

about some of the efforts that the SBA has been taking to address 

those issues. To the credit of both Administrator Mills and to him, 

they have taken great, incredible steps to try to address those problems. But I think that it is important that others hear this as well 

so that they can be aware that there are a lot of things that are 

being done to try to address those issues, particularly his reference 

to a 100-fold increase in the monitoring that has been done. But 

I will let you just briefly speak about that, if you can, just so that 

others in this room can hear about the benefits of everything you 

guys have been doing. 

Mr. JORDAN. Absolutely. Thank you. 

The Administrator, the agency, and myself, we take our need to 

execute and oversee the HUBZone program effectively and efficiently incredibly seriously. We are well aware of the GAO and 

some of the IG reports around the difficulties that have been found 

in the program, and so we have taken some quick action to both 

improve the sort of up-front certification processes and also assess 

and clean the current pool of certified firms to ensure that we 

eliminate all small business contracting programs of fraud, waste, 

abuse, or mismanagement. 

Now, the problems did not crop up overnight, and they will not 

be fixed overnight, but I feel we have made a lot of progress, and 

there are a few tangible things that I would just briefly highlight. 

On the certification front, we have engaged some external experts to help us with the business process reengineering, so we are 

currently operating a very strict level of certification review, and 

we want to figure out what is the best level that we can effectively 

and efficiently certify firms, so ensure that no fraudulent firms get 

in but also do so in a timely manner so that firms that want to 
32 

pursue the certification and avail themselves of some great 

HUBZone set-aside opportunities are able to do so. 

Then in terms of evaluating the firms who are currently in the 

program, while we are doing a number of things, leveraging technology in our databases, we did understand the GAO’s point about 

conducting actual site visits. And when Acting Administrator Hairston had testified in March in front of the House Small Business 

Committee, he was asked, ‘‘How many sites visits have you conducted in the first 6 months of the fiscal year?’’ And his answer, 

unfortunately, was seven. And so Administrator Mills has built on 

what Acting Administrator Hairston set up to conduct quite a few 

site visits to verify eligibility of HUBZone firms, and so in the less 

than 6 months since that testimony, we have conducted over 800 

site visits, and these are comprised of typically verifying the principal office location and the fact that 35 percent of the employees 

reside in the HUBZone. 

And so we are very proud of—as you said, it is over a 100-fold 

increase in the number of sites visits that we have conducted; also 

in the fact that we are still not taking our eye off the ball and encouraging contracting officers to utilize this program to drive contracts to small business owners in historically underutilized business zones. I would point again to the Recovery Act statistics where 

while the HUBZone program has a 3-percent statutory goal, it is 

currently at 6.1 percent, so it is certainly a focus to make sure that 

the program is run effectively from a certification and eligibility 

standpoint, but also effectively from a serving the people for which 

it was set up standpoint. 

Mr. WALKER. Okay. Thank you very much for that. 

The other question I wanted to shift over to the service-disabledveteran realm as well. Maybe first, did you want to say anything 

in addition to that about the HUBZone program, Mr. Newlan? 

Mr. NEWLAN. I never want to pass up the opportunity. 

[Laughter.] 

We fully support everything that the SBA is doing. We clearly do 

not want any other HUBZone firms headquartered in a Starbucks. 

We have got to stop that. You know, we are reporting to the SBA 

any incidences that we know about. 

But consider, as the House is, throwing the program out, it is 

like throwing the baby out with the bath water. It is the only program designed to bring jobs where America needs them the most. 

The most recent census report shows more Americans living in poverty this year than last, and it is one in eight. One in eight Americans right now live below the poverty level. And the HUBZone program is the only program we are going to talk about today in this 

forum that is designed to help that situation. 

So we appreciate Senator Snowe’s strong support for the program. We hope we have Senator Landrieu’s strong support for the 

program. And I know we have strong support from other members 

of this Committee. 

Thank you. 

Mr. WALKER. Great, thank you. 

Like I said, I would like to briefly, in the interest of time, quickly 

shift over to the service-disabled-veteran program, the women’s 
33 

program, and the HUBZone program, too, in other aspect, and that 

is in terms of parity for the programs. 

As we know, there was an issue—most people are familiar with 

it—where there was a question as to whether or not each program 

should be put on equal footing when awarding contracts or whether 

one contracting program had a preference over others. That is 

something that Senator Snowe strongly cared about making sure 

that there was true parity, and that in her definition, true parity 

is giving every program equal opportunity to compete. Chair 

Landrieu as well cared very deeply about this, and they worked together to ensure that the DOD authorization bill included a provision to make that very clear. So we appreciate Chair Landrieu and 

her staff’s work on that as well to make sure that happens, and 

we are hoping that that gets retained in conference. 

But as another side of that, another aspect of it, as I said, Senator Snowe believes that true parity requires an equal opportunity 

for all the programs to compete, and as part of that provision that 

she included in an amendment would called for the creation of a 

mentor-protege program modeled after the 8(a) program for service-disabled veterans, HUBZones, women-owned firms. And I just 

wanted to get some feedback from those on why that would be beneficial and what the benefits are to making sure that true parity 

should include mentor-protege, because if the programs are going 

to be on an equal footing, they should truly be on an equal footing, 

in our opinion. 

Anyone who would like to response? 

Ms. SULLIVAN. Well, I would like to say that, absolutely, please 

do. It is so much common sense, it is almost embarrassing to have 

to say that you have to do it. 

Why would you have different mechanisms in different programs 

that are all designed to help the small, disadvantaged business 

community? To not give it parity and not give the same mechanisms for every program seems to me to defy logic. 

Mr. WALKER. Mr. Newlan. 

Mr. NEWLAN. We certainly support mentor-protege, and thank 

you for sponsoring that amendment. We do hope it gets passed. 

Anything we can do to encourage. We support parity, even though 

we happen to find ourselves right now today probably at the top 

of the heap. That is not a position we have worked for or asked for, 

but it is certainly one GAO protest decisions have thrust upon us. 

But we support parity. 

We ask you to keep in mind that even after that bill, if it does 

become law, we will not be in parity with the 8(a) and certainly 

with the ANC sole-source rules and the 8(a) sole-source rules dramatically different than what the service-disabled vets have, what 

we have, and probably what the women will have, I think the next 

thing we will have to look at is should there be a change in the 

sole-source rules for the up-and-coming women’s program, the service-disabled vet, and the HUBZone program. 

Thank you. 

Mr. WALKER. Would you like to comment, Ms. Robinson-Berry. 

Ms. ROBINSON-BERRY. Yes. I think that it is very important that 

we do have parity, because right now a lot of the programs and the 

socioeconomic categories are in competition. We have some—espe-
34 

cially in the small disadvantaged businesses, some are grandfathered for life, like the Native American and the ANCs, where 

others are not. And then we have emerging new socioeconomic categories that come up and some that people just make up on certain 

RFPs. And so I think it is really important that we have standards 

in that area. 

To address the mentor-protege issue, I think mentor-protege is a 

good program. As a matter of fact, many of our industry partners 

have graduated, and more small disadvantaged businesses, into 

large business because of the successful mentor-protege. But there 

are funding limitations and so forth. But having a mentor-protege 

program aligned by itself I do not think works. You need to align 

it with the other initiatives. You have the historical black college 

and minority institute initiative. You have the SBIR program. You 

have the mentor-protege program and others that are all separate. 

And I think the best model would be to look at how we can integrate those various programs together so we can benefit and grow 

our small businesses more rapidly. 

If we are going after high-tech companies, we align the innovative research projects with a mentor-protege opportunity, align it 

with a university so we are fixing the pipeline for the future, but 

we are also pushing our small business community in the same 

alignment with our technology road map. 

Mr. WALKER. Certainly, it is important to have synergy and to 

foster coordination and leverage, and I think that is something that 

we should do as well. 

Mr. Hesser. 

Mr. HESSER. I agree. 

[Laughter.] 

Mr. WALKER. Well put. 

Mr. HESSER. The vet force does, in fact, agree. Recently, last 

month, we presented to the congressional roundtable at the House, 

and we had a report to the Nation entitled ‘‘Breakdown: National 

Security Crisis in a Small Business World.’’ What we were first 

doing was writing a paper on veterans back from the beginning of 

the country as to how it has gone, and then we got involved with 

small business, and all of a sudden, we found that we wanted our 

report to be only on small business. And I hope you get an opportunity to see it. There are some out on the table. But it is also on 

vet-force.org. That paper is on there, and any small business, I 

think, should read it because it has been presented everywhere 

around the House, the Senate, and the executive branch, and wherever we could get it. 

It basically says we are in trouble because—Ron Newlan said it. 

We are in crisis right now, true crisis of small business. That was 

our concern about the ARRA brought up, no small business in 

there. And I do not care what your figures say, I would like to have 

a separate meeting about what money is really going where. And 

I know $4.2 billion that just went right out the window, no small 

business. 

We are very concerned from the service-disabled-veteran side 

about the slowness for the veteran resource centers. We are talking 

about the women-owned program. They have got centers all over 

the place. We have none—well, we have three. I am sorry. I think 
35 

we may have gone up to four now. We are up to four now. Wow. 

I mean, why are the veterans not getting veteran resource centers? 

That is something that does not make sense to me. 

The other thing is I will refer to S. 2300, but it has been put in 

other bills about verification, certification of all the things, 8(a), 

women-owned, everybody, about how they have to be verified and 

everything else. 

I think there has to be a separate powwow between several agencies and organizations looking at what has happened to the Center 

for Veteran Enterprise. The Center for Veteran Enterprise picked 

up this thing of verifying service-disabled veterans. They now have 

2,000 who have been verified, and there are 13,000 total. So they 

have another 11,000 to go. In about 5 years they will make it, because they have the staff that they have. All the contracting, they 

are working hard to do this. This is not a slight against CVE. They 

are working, but it is an example that if you put that same thing 

in there for 8(a)s, the same thing for all the others, women-owned, 

everything, it is just going to tie things up again, because someone 

had a brilliant idea at CVE of giving a logo and letting people use 

this logo and having a pin. You go to a show now, and you go along 

the booths, and you will see this one has a logo, this one doesn’t, 

oh, the other two do not—it automatically put a fence around all 

the service-disabled veterans who have not had their turn yet to be 

verified. This is a very serious problem. We brought this up over 

and over and over at CVE. 

They are working on it now, trying to figure out what they are 

going to do. We now have 2,000 companies out there with a logo 

saying they are verified, a real pretty logo, and they put it everywhere, on their letterhead and everything. There are people who 

did not have the verification. It looks like they are less than they 

are. In fact, they have changed the wording on what they are. 

So the veteran enterprise resource centers we have talked about, 

the certification, of course, there are all the other ones, but I guess 

the last thing I would like to say about veterans, I have heard the 

figure from 94 percent to 98 percent, saying that 98 percent of 

those employed Americans are employed by small businesses. I 

want to emphasize over and over. How can you increase employment, which the stimulus bill is supposed to be doing, when you 

keep giving all the money to big business? They do not hire anybody. They usually fire them. Or they work with a small business 

and get them up there where they have got to maintain $2 million, 

$3 million support, and then they let go of them, and they are out 

there by themselves. What are they going to do now? 

This is happening all over the place. I do not know all the answers. I do not think any of us have all the answers. But I do think 

we need to look real close at those other points. 

Mr. WALKER. Yes, I just want to quickly, before turning it over 

to Don, thank you for that as well as just give notice to Jim 

Wilfong. Jim Wilfong is from Maine, a veteran, who contributed to 

that report and did a phenomenal job, and he is a close friend to 

the Senator as well as the Committee. 

I also just want to mention that this Committee could not agree 

with you more about the veteran centers. We worked together on 

a bipartisan basis to pass a bill that would take the funding for the 
36 

Office of Veterans Business Development for a traditional level of 

$750,000 up to multiple million dollars. We worked together and 

passed that bill out of Committee unanimously. 

So we agree completely. We are on your side. We agree with it, 

and thank you for your time. 

Mr. HESSER. We know that. Thank you. 

Mr. WALKER. Thank you. That is all. 

Mr. CRAVINS. All right. First of all, let me just on behalf of the 

Chair and on behalf of the Ranking Member and our staffs thank 

all of you for participating in the roundtable today. Again, we hope 

this is just the beginning. We have had a relationship with many 

of you for many, many years, and we hope that we can continue 

that. 

Just to give you a heads up of what we are going to be doing in 

the future, we are going to have a hearing on October 1st where 

we will look into the Recovery Act and look at the provisions of the 

Recovery Act as they relate to small businesses to make sure that 

our small businesses do have access to capital and that they are 

participating in the procurement opportunities in the Recovery Act. 

Senator Landrieu and Senator Snowe will have a full Committee 

hearing on October 1st. 

Also, both of our staffs are working very hard to craft legislation 

that will hopefully fix some of the issues that we talked about here 

today, so we would love to continue having input from your respective agencies and organizations. 

And as Senator Landrieu said, the record will be open for 2 

weeks, so if you have more information that you would like to submit for the record, we would appreciate it. 

Thank you all very much, and thank you to those of you in the 

audience for participating. 

[Whereupon, at 11:56 a.m., the Committee was adjourned.] 
(37) 

APPENDIX MATERIAL SUBMITTED 
38 

STATEMENT FOR ROUNDTABLE ON SMALL BUSINESS CONTRACTING 

"Small Business Contracting: Ensuring Opportunities for America's Small Businesses" 

Ranking Member Olympia J. Snowe 

Senate Committee on Small Business & Entrepreneurship 

September 22,2009 (Version 1,9-18-09, at 3:00 PM) 

Thank you, Chair Landrieu for holding this critical roundtable on small 

business contracting and your continued focus on issues that affect small 

businesses. As Congress attempts to pass legislation on high profile issues such 

as health care reform and climate change, we must also not lose focus on 

additional ways to provide relief to America's small business. I know at times it 

may be hard for our constituents to believe, but it is possible for politicians in 

Washington to do multiple things at the same time. That said, we must remain 

diligent in our efforts to improve the business climate for small firms and ensure 

that the Federal government is holding up its end of the bargain with regard to 

small business goals and objectives. I appreciate all of the witnesses for 

participating in this roundtable that will provide valuable insight into ways to 

improve our existing small business contracting programs. 

As Ranking Member and former Chair of this Committee, I have 

witnessed firsthand the Federal government's inability to satisfy the majority of 

the small business goals. Recently, I sent a letter to Administrator Karen Mills 

urging her to focus on filling key vacancies within the SBA and to identify more 

prime and subcontracting opportunities for small businesses. Year in and year 

out, with the exception of small disadvantaged businesses, the government fails to 

reach goals for small businesses in general and service-disabled veteran-owned, 

women-owned, and HUBZone firms in particular. This is simply unacceptable, 

and I look forward to hearing from the participants on specific and realistic 

solutions for increasing small business participation in Federal contracting and 

Page lof3 
39 

for the government to not only achieve the statutory small business goals, but to 

exceed them. 

In February of this year Congress passed the American Recovery and 

Reinvestment Act. I am eager to hear from the panel on the affect this legislation 

has had thus far and how we can increase small business participation in 

Recovery Act contracts. This week, the SBA released current figures on 

Recovery spending that are encouraging, but also highlight how much more 

must be done. As of September 14, 2009, the total dollars in Recovery Act 

contracts equaled approximately $12.8 billion. The good news is that 23 percent 

of that figure, just under $3 billion, has gone to small businesses. Unfortunately 

only one-fifth of the total monies allocated in the Recovery Act have been rolled 

out. It is imperative that the Administration release projects quickly and allow 

the Recovery Act to provide the opportunities we in Congress intended. 

With the exception of women-owned small businesses, the Federal 

government is doing a much better job meeting and exceeding the small business 

goals for Recovery Act contracts. These figures prove that the small business 

goal requirements are attainable. I remain puzzled at why the Federal 

government is unable to meet the annual objectives if it is possible in Recovery 

Act contracts! 

In addition to goaling requirements, there are numerous issues I hope to 

see probed this morning to find ways to increase small business participation in 

Federal contracting. These include: subcontracting, teaming, small business size 

standards, contract bundling, and consolidation. I hope there is a frank and 

honest discussion of what is presently working and what needs to be done to 

improve these provisions. These are not new issues, and in fact, this committee 

Page 2 of 3 
40 

has held multiple hearings and roundtables on an assortment of contracting 

issues over the years. 

I would like to close by commenting on the need for parity among the 

small business contracting programs. On July 21, 2009, I introduced the Small 

Business Contracting Parity Act of 2009. This piece of legislation makes clear 

that HUBZones, Service-Disabled Veteran-owned, 8(a), or women-owned firms 

should be treated equally and no program should be given preferential treatment 

over another. Chair Landrieu and I also included an amendment in the DOD 

authorization that would bring the SBA contracting programs closer to true 

parity, and I am cautiously optimistic the provision will be retained. I have been 

a longstanding champion for these small business programs, and it is imperative 

that small business contractors be given an equal opportunity to compete for 

Federal contracts. 

Federal contracts provide vital economic benefits for small business. In 

the 109th and lloth Congresses, I partnered with former Chair Kerry to 

introduce the Small Business Contracting Revitalization Act of 2007, which 

passed this committee unanimously but failed to pass the full Senate. I am 

hopeful that with Chair Landrieu's leadership and your input today we can 

improve the legislation and ensure it becomes law this Congress. It is critical 

that the Federal government do more to satisfy its small business contracting 

goals, helping small businesses to continue to create two-thirds of all new jobs 

across our nation. 

Thank you, Madam Chair. 

Page 30f3 
41 

Associated Builders 

and Contractors, Inc. 

U.S. SENATE COMMITTEE ON SMALL BUSINESS AND 

ENTREPRENEURSHIP 

"Small Business Contracting: Ensuring Opportunities for America's 

Small Businesses" 

Tuesday, September 22, 2009 

10:00 a.m. 

SR-485 

Comments of Associated Builders and Contractors, Inc. 

INTRODUCTION 

ABC commends the Senate Committee on Small Business and Entrepreneurship's 

leadership in finding solutions to improve contracting laws for America's small 

businesses. ABC appreciates the opportunity to provide input on this critical issue. We 

strongly urge the committee to examine the negative impact that Executive Order 13502, 

government-mandated project labor agreements (PLAs), and the FAR Council's related 

proposed rule will have on small businesses in the construction industry. 

1. ABC's Interest In Small Business Contracting 

ABC is a national construction industry trade association representing 25,000 

individual employers in the commercial and industrial construction industry. ABC 

represents both general contractors and subcontractors throughout the United States. The 

majority of ABC's member companies are small business "merit shop" companies, who 

support and practice full and open competition, without regard to labor affiliation. The 

merit shop philosophy helps ensure that taxpayers and consumers alike receive the most 

for their tax and construction dollars. 
42 

Conservatively, ABC's members employ more than 2.5 million skilled 

construction workers whose training, skills, and experience span all ofthe twenty-plus 

skilled trades that comprise the construction industry. The Bureau of Labor Statistics 

(BLS) most recent report states that the non-union private sector workforce in the 

construction industry comprises more than eighty four (84) percent of the total industry 

workforce.' 

The majority of ABC's contractor members are classified as small businesses by 

the Small Business Administration? This is consistent with the findings ofthe Small 

Business Administration that the construction industry has one of the highest 

concentrations of small business participation (more than 86 percent) in the U.S. 

economy.] 

Many of ABC's small business members, along with numerous other small 

nonunion contractors who are not ABC members, perform work on federal and federallyfunded construction projects. 

ABC would like to call the Committee's attention to a recent shift in federal 

construction procurement policy that will harm small businesses that participate in the 

federal construction marketplace. 

2. ABC Concerns About The Impact of President Obama's Executive 

Order 13502 on Small Businesses in the Construction Industry 

On Fcbruary 6, President Obama issued Executive Order 13502, which 

encourages fedcral agencies to require government-mandated PLAs on federal 

construction projects whose total costs exceed $25 million. 

A PLA is a contract that discourages competition from nonunion contractors and 

their nonunion employees by requiring a construction project to be awarded only to 

contractors and subcontractors that agree to recognize unions as the representatives of 

their employees on that job; use the union hall to obtain workers; obey the union's 

restrictive apprenticeship and work rules; and contribute to union pension plans and othcr 

funds in which their employees will never benefit unless they join a union. 

ABC's membership strongly opposes government-mandated PLAs because they 

discourage, if not prohibit, qualified ABC member companies and their employees from 

competing for construction projects paid for by their own tax dollars unless they agree to 

the costly and discriminatory terms in typical PLAs. 

I See bls.gov "Union Members Summary" (Jan. 2009). http://www.bls.gov/news.release/union2.nrO.htm 

2 Small businesses are defined by the SBA as general building or heavy contractors with annual receipts 

under $33.5 million, or specialty trade contractors with annual receipts under $14 million. 

http://www.sba.gov/contractingopDortunities/officials/size/table/index.html 

J The Small Business Economy: A Report To The President, U.S. Small Business Administration, Office of 

Advocacy (2009), at 8. 

2 
43 

Executive Order 13502 also repealed Executive Order 13202, which prohibited 

PLAs on federal and federally-funded construction projects from 2001-2009. It is 

estimated that between 200 I and 2008, Executive Order 13202 ensured that at least 

$147.) bi Ilion worth of federal construction projects was bid without discriminatory and 

wasteful government-mandated PLAs.4 The actual value of construction projects 

protected hy Exeeutive Order 13202 is exponentially larger, as the above figure does not 

include local construction spending that received federal funding or assistance protected 

by the executive order. 

3. ABC Comments on FAR Council's Proposed Rule, Federal 

Regulation FAR Case 2009-005, Use of Project Labor Agreements for 

Federal Construction Projects 

Section 6 of Executive Order 13502 ordered the Federal Acquisition Regulatory 

Council (FAR Council) to amend the Federal Acquisition Regulations to implement the 

provisions of Executive Order 13502. 

On July 14, the Civilian Agency Acquisition Council and the Defense Acquisition 

Regulations Council (the Councils) issued a Proposed Rule, Federal Acquisition 

Regulation FAR Case 2009-005, Use a/Project Labor Agreements/or Federal 

Construction Projects, sand solicited comments from the public on the Proposed Rule. 

The FAR Council's comment period closed on September 23, 2009. More than 

900 ABC member companies and employees filed comments opposing the FAR 

Council's Proposed Rule and Executive Order 13502. Many of these comments came 

from ABC's small business members who perform work on federal and federally-funded 

construction projects, including projects whose total cost exceeds $25 million. 

In a recent ABC membership survey, more than 35 percent of the respondents 

stated that they perform work on such projects. Significantly, 98 percent of these survey 

respondents further indicated that they would be less likely to bid on such work if a PLA 

were imposed as a condition of performing the work.6 

ABC's attached comments argue that neither Executive Order 13502 nor the FAR 

Council's Proposed Rule provides support for the assertion that PLAs promote economy 

and efficiency in federal procurement. In addition, ABC's comments argue that PLAs 

will dramatically reduce competition and increase costs on federal construction projects 

and discourage bids from small businesses, including minority-owned and women-owned 

firms.7 

4. Economic Impact Of The Proposed Rule On Small Businesses 

• U.S. Census Bureau, Annual Value of Federal Construction Pill in Place 1993-2008-

http://www .census.gov /constlC30/federal.pdf 

5 http://edocket.access.gpo.gov/2009/pdf/E9-16619.pdf 

6 Newsline (July 22, 2009), available at abc.org. 

7 See Attachment C 

3 
44 

The reason why so many small businesses refuse to bid on PLA-mandated 

projects, as explained in greater detail in ABC's attached comments, is that PLAs have a 

discriminatory impact on the costs and business methods of non-union contractors and 

their workers, increasing the contractors' costs while reducing their workers' take home 

pay on public projects covered by prevailing wage laws. Individual statements to this 

effect have been filed with the FAR Council by many small contractors and 

subcontractors, which are hereby incorporated by reference. Representative samples of 

such statements by small subcontractors are attached to these comments for ease of 

reference.8 

A recent study of the discriminatory impact ofPLAs on federal construction, 

performed by Professor John McGowan of St. Louis University demonstrates 

conclusively that PLAs have a significant economic impact on a substantial number of 

small entities within the meaning of the Regulatory Flexibility Act, 5 U.S.c. § 601.9 As 

calculated therein, if only 10 percent of non-union contractors are forced to enter into 

PLAs as a condition of performing work on federal projects, the costs to such contractors 

will exceed $360 million. The increased costs to small businesses could exceed $1 billion 

if more contracts are affected than the Council is currently estimating. 

The adverse economic impact of PLAs on small businesses in the construction 

industry is directly contrary to Congress's repeatedly expressed intent to promote and 

encourage federal procurement to small businesses. Since 1978, when Congress amended 

the Small Business Act to require all federal alfencies to set percentage goals for the 

awarding of procurement contracts to MBEs, I the amount of federal procurement dollars 

directed towards small businesses has increased dramatically. The Small Business 

Administration reports that more than 38 percent of federal subcontracts, including 

construction contracts, are awarded to small businesses. I I 

Further evidence of the impact of PLAs on small businesses is contained in 

comments submitted to the FAR Council by prime contractors who have themselves 

performed contracts in the $25 million-plus range. These comments uniformly confirm 

that they have subcontracted much of the work on such projects to small business 

subcontractors. See, for example, the comments of Nova Group, a non-union contractor 

who has performed more than $700 million in construction contracts on federal projects 

with costs exceeding $25 million. 12 Nova's comments, which describe ABC members' 

typical experience, show that more than 60 percent of the work on large federal 

construction contracts has been subcontracted to small businesses, the majority of whom 

are non-union. Such small business subcontractors are very unlikely to continue to 

8 See Attachment A. 

9 McGowan, The Discriminatory Impact of Executive Order 13502 On Non-Union Workers and 

Contractors, available at hnp:llwww.abc.orglplastudies. 

10 P.L. 95-507 (1978), 15 U.S.c. 644 (g). 

II See Clark, Moutray and Saade, The Government's Role in Aiding Small Business Federal Subcontracting 

Programs in the United States, Office of Advocacy, Small Business Administration (2006), available al 

hnp:/fsba.govladvolresearch. 

12 Attachment B 

4 
45 

perfonn work on federal construction contracts under the Proposed Rule because they 

know that they will be put at a severe competitive disadvantage by the tenns and 

conditions ofa PLA. 

5. Requirements of the Regulatory Flexibility Act (RFA), 5 U.S.c. § 601. 

The U.s. Senate Committee on Small Business and Entrepreneurship should be 

concerned that the FAR Council's Proposed Rule failed to conduct an Initial Regulatory 

Flexibility Analysis. 

The RF A requires all agencies conducting rulemakings to "prepare and make 

available for public comment an initial regulatory flexibility analysis," which "shall 

describe the impact of the Proposed Rule on small entities.,,13 As part of its analysis, the 

agency is required to consider other significant alternatives to the rule which could affect 

the impact on small entities, and explain any rejection of such alternatives in its final 

regulatory flcxibility analysis. 14 The sole relevant exception to this requirement arises if 

"the head of the agency certifies that the rule will not, if promulgated, have a significant 

economic impact on a substantial number of small entities.,,15 The agency must provide a 

factual basis for its certification. 16 Such a detennination is subject to judicial review for 

its correctness under a non-deferential standard. I 

7 

6. Comments On The FAR Council's Specific Grounds For NonCompliance With The Regulatory Flexibility Act. 

The FAR Council's entire justification for failing to conduct an Initial Regulatory 

Flexibility Analysis is contained in one sentence: "[B]ecause the rationale for this 

detennination is based on the discretionary nature of the regulation being promulgated 

and the fact that the application ofthe rule is only in connection with large scale 

construction r,rojects over $25 million (those that would likely impact large 

businesses)." 8 This finding is legally insufficient and, to the extent that it states a factual 

basis at all, the facts are wrong. 

First, the discretionary aspect of the policy is an insufficient ground to detenn ine 

that the policy will not have a substantial impact, and in fact the impact of the Proposed 

Rule will be very significant. As specifically stated in the Proposed Rule, the Rule's 

purpose is to impose a new policy on all procurement agencies of the federal government, 

i.e., to encourage all executive agencies to consider requiring the use of project labor 

n 5 U.S.c. § 603(a). 

14 Id. at § 604. A "significant regulatory alternative" is defined as one that: I) reduces the burden on small 

entities; 2) is feasible; and 3) meets the agency's underlying objectives. See, A Guide to Federal AgenCies. 

How to Comply with the Regulatory Flexibility Act, SBA Office of Advocacy, May 2003, p. 73-75 

(available at htlp://www.sba.gov/advo/laws/rfaguide.pdD. 

15 ld. at § 605(b). 

16 See North Carolina Fisheries Association v. Daley, 27 F. Supp. 2d 650 (E.D. Va. 1988). 

17 See Aeronautical Repair Station Assn, Inc. v. FAA, 449 F. 3d 161, 175-177 (D.C. Cir. 2007), reversing 

agency certification of lack of impact on small entities. 

18 74 Fed. Reg. at 33954. 

5 
46 

agreements on all construction projects whose costs exceed $25 million.'9 By the 

Council's own (unsupported) estimate, IO percent of all federal construction contracts 

with costs exceeding $25 million will become subject to PLAs as a result of the Proposed 

Rule. Based upon the value of such contracts in 2008, which according to 

usaspending.gov exceeded $28 billion for facilities construction alone, even 10 percent of 

that figure will exceed a value of$2.8 billion per year. Based on recent reports of federal 

procurement officials subjected to political pressure to attach PLAs on projects to reward 

political patrons of members of congress and political appointees, the actual figure is 

likely to be higher 

The only justification cited by the Council for ignoring this substantial amount of 

federal construction that will be impacted by the Proposed Rule is the claim referenced 

above, that large scale construction projects would likely impact only large businesses. 

As described infra at p. 2-3 and in numerous small business comments filed with the 

FAR Council, however, many small construction subcontractors regularly perform work 

on large scale construction projects in the federal market. Indeed, the small business 

preferences established by Congress and by each federal agency mandate such 

subcontracting to small and disadvantaged businesses. As is further set forth in the 

Proposed Rule, all PLAs imposed by such federal a~encies must require both contractors 

and subcontractors to enter into union agreements.2 Therefore, it is simply false for the 

Council to claim that only large contractors will be impacted by the Proposed Rule, and 

the Council could only have reached this conclusion by impermissibly excluding from 

consideration the economic impact on subcontractors. 

The Council's failure to address the economic impact of its Proposed Rule on 

subcontractors plainly violates the Regulatory Flexibility Act, 5 U.S.C. § 601. The U.S. 

Court of Appeals for the D.C. Circuit recently addressed this issue in the closely 

analogous case of Aeronautical Station Assn, Inc. v. FAA, 494 F. 3d 161 (D.C. Cir. 2007). 

There the Court held that the FAA was required to consider the economic impact of a 

proposed drug testing rule on subcontractors who performed safety-related functions for 

air carriers. The FAA asserted that subcontractors were not "directly regulated" 

employers for purposes ofthc Proposed Rule. Rejecting that claim, the D.C. Circuit 

found that both contractors and subcontractors (at whatever tier) "are entities subject to 

the proposed regulation - that is, those small entities to which the proposed rule will 

apply." The court distinguished Cement Kiln Recycling Coalition v. EPA, 255 F. 3d 855, 

868-9 (D.C. Cir. 2001) and similar cases relied on by the FAA. 

For the same reason, the Council is required to analyze the impact of the Proposed 

Rule on subcontractors, because they are plainly subject to the proposed regulation, 

according to its express language. Certainly, whenever a federal agency implements a 

union-only PLA on future federal construction work, such a PLA will directly regulate 

subcontractors by requiring them to enter into a labor agreement. Such a requirement will 

increase such subcontractors' costs by at least 25 percent and possibly more. See 

discussion above at p. 2-3. As numerous contractors have commented to the FAR 

19 74 Fed. Reg. at 33955, proposed amendment to 48 C.F.R. 22.503 "Policy." 20 74 Fed. Reg. at 33956, proposed amendment to 48 C.F.R. 22.504(b)( 1). 

6 
47 

Council. either they will be unable to comply with the union-only requirement (thereby 

losing the chance to perform the work); or if they do sign the PLA, they will be 

confronted with increased administrative costs of compliance and subjected to unwanted 

liability to union pension funds, among other costs. The number of small businesses 

affected will be "substantial," as that term has been defined by legislative history and 

SBA guidance?1 

CONCLUSION 

ABC commends the Senate Committee on Small Business and Entrepreneurship's 

leadership in finding solutions to improve contracting laws. We strongly urge the 

committee to examine the negative impact that Executive Order 13502, governmentmandated PLAs, and the FAR Council's proposed rule will have on opportunities for 

small businesses who compete for federal construction contracts. 

A legislative solution, the Government Neutrality in Contracting Act (S.90), 

introduced Jan. 6 by Sen. David Vitter (R-LA.), would prohibit federal agencies from 

requiring costly and discriminatory government-mandated PLAs on federal and federallyfunded construction projects. 

If future legislation aimed at ensuring opportunities for America's small 

businesses incorporated language from S. 90, the Committee would be serving the best 

interests of small business owners, taxpayers and the U.S. construction industry. 

Respectfully submitted, 

Ben 

ZJ-~ Brubeck 

Labor and State Affairs Director, ABC National 

Government Affairs 

(703) 812-2042 

brubeck@abc.org 

21 As noted in the SBA Guide to the RFA: "The intent of the RF A, ... was not to require that agencies find 

that a large number of the entire universe of small entities would be affected by a rule. Quantification of 

"substantial" may be industry- or rule-specific. However, it is very important that agencies use the broadest 

category, "more than just a few." See "A Guide for Government Agencies: HolY to Comply With the 

Regulatory Flexibility Act." at 19, SBA Office of Advocacy (May 2003), available at 

sba.gov/advo/laws/rfaguide.pdf. Clearly, this threshold test is met by the substantial number of small 

subcontractors in the construction industry who perform work on large federal contracts. 

7 
48 

AttachDlent A 
49 

Contractor Comment and Submission 

Re: Federal Acquisition Regulation; FAR Case 2009-005, Use of 

Project Labor Agreements For Federal Construction Projects").1 

My name is Ronald M. Fedrick. I am the President of Nova Group, Inc. ("Nova"). 

Nova performs the following types of work: DOD prime construction contracts, 

primarily fueling and hydrant fueling systems and marine waterfront and 

waterfront utilities projects. 

Over its thirty (30) plus years history, Nova has performed one-hundred seventyeight (178) federal construction projects totaling $1,478,584,040 as a prime 

contractor to the Federal Government, starting as a small business performing 

prime construction services at Mare Island Naval Shipyard, Vallejo, California, 

growing into a large general or prime contractor performing prime construction 

services for the Federal Government in some thirty-two (32) states, Washington, 

D.C., Guam, Diego Garcia, Israel, and Qatar, where we are working at present. 

Over the last nineteen (19) years, Nova has performed more than $704,500,000 

worth of construction work on twelve (12) federal construction projects whose 

total costs were $25 million or more. No federal agency - NAVFACENGCOM, 

USACE, DLA -- required me or Nova to sign a union labor agreement on any of 

these projects. 

While Nova self performs much of its work, we subcontract work to both 

signatory and non-Signatory firms. Neither Nova's performance of work nor that 

of its subcontractors on the above referenced federal construction projects has 

been delayed, stopped, or suspended by any labor disputes. There have been 

no jurisdictional disputes on our projects. We have also never encountered any 

of the other labor problems cited as justifications for union-only PLAs in Section 1 

of Executive Order No. 13502 or Section A of the Proposed Rule (such as the 

claims of problems predicting labor costs, interruptions in labor supply, lack of 

coordination among union and non-union contractors, uncertainty about labor 

conditions, or jobsite frictions or disputes). From my personal experience on 

federal construction projects, I can state that there is no need for union-only 

PLAs to prevent labor problems. 

All of our construction work is competitively bid. For the first twenty (20) years of 

our history, all of our work was let under an Invitation for Bid where the lowest 

priced offer from a construction contractor who would financially support the 

project and provide payment and performance bonds was awarded the project. 

For the last ten (10) years, the overwhelming majority of our work is let under a 

Request for Proposal where the award is made to the contractor who provides 

I Executive Order No. 13502 for the first time declares as a matter of law that federal agencies whose 

construction projects exceed $25 million may require construction contractors on such projects to sign 

union-only project labor agreements as a condition of being awarded such work. 
50 

"best value" to the Government, price and technical proposal roughly equal. 

Among the technical factors evaluated are our experience - having performed 

the same type of work before, our past performance - how well we performed the 

same type of work before, our use of and commitment to small business. The 

majority of our federal projects are evaluated by the Government. The majority 

of our projects receive an "Outstanding" evaluation by the Government. The 

technical evaluation factors upon which we are evaluated by the Government 

include: quality control and quality of workmanship; timely performance; 

effectiveness of management with subcategories for compliance with laws and 

regulations and implementation of small business subcontracting plan; 

compliance with labor standards, including "compliance with labor laws and 

regulations with specific attention to the Davis Bacon Act and EEO 

requirements"; and compliance with safety standards. Our "Outstanding" 

Performance Evaluations attest to a number of things: (1) The skill level, 

competence, commitment, and proficiency of our craft workers who construct 

acknowledged quality, timely, safe projects for the Government and for the U.S. 

taxpayer; (2) the commitment of Nova management to delivering quality, timely, 

safe projects while providing "the maximum practicable opportunity" for small 

business, veteran and service disabled veteran owned small business, HUBZone 

small business, small disadvantaged business, and women-owned small 

business concerns to participate as subcontractors on our construction projects. 

I am personally very proud of the fact that Nova was the recipient of highly 

prestigious Eisenhower Award for support to small business in the form of 

subcontracting opportunities and particularly proud that since 1992 Nova has 

afforded $316,847,227 subcontracting opportunities for small business. 

Regrettably, if a federal agency mandates a union-only project labor agreement 

on future federal construction work, Nova will be much less likely to bid on such 

work. Additionally, many, if not the majority of my subcontractors, primarily small 

businesses, are much less likely to submit sub-bids for the work. Nova and 

many of our subcontractors will be discouraged from bidding because a uniononly mandate will discriminate against our workers and against our business. 

If Nova signs a union project labor agreement, our workers will be discriminated 

against because a sizable portion of their current Davis-Bacon wages would 

have to be paid into union pension funds, from which our craft employees will not 

get any benefits. Additionally, our employees may also be forced to pay dues to a 

union against their will. They may also be denied employment altogether under 

union hiring hall requirements. All Nova employees have medical and dental 

insurance for themselves and their dependents and have a fully vested savings 

and retirement plan. In fact, our craft workers will experience a decrease in take 

home pay if the projects upon which they work are subject to a PLA. Nova's 

health and welfare, which includes employee and dependent, and pension plans 

cost less than the union programs. The excess fringe rate is added to the 

employee's base rate in the form of additional wages. One Navy and one Corps 

of Engineers projects illustrate this point. On a Navy project at the Naval Station 
51 

in San Diego, California there were a total of 147,923 crew hours. The total 

Davis Bacon combined fringe benefit was $2,175,657.19. The cost of Nova's 

medical and mental insurance for these hours was $338,197.62 while the costs 

of its retirement plan for these hours were $521,532.80. The excess fringe of 

$1,315,926.77 was paid to the employees. On the Corps of Engineers project in 

Hawaii, there were a total of 74,513.5 crew hours. The total Davis Bacon 

combined fringe benefit was $$1,739,399.71. The cost of Nova's medical and 

mental insurance for these hours was $122,029.93 while the costs of its 

retirement plan for these hours were $773,725.87. The excess fringe of 

$843,643.91 was paid to the employees. Under PLA's, on these two (2) projects 

alone Nova craft workers would lose some $2,159,570.68 in income. 

If Nova signs a union project labor agreement, we will be discriminated against 

by having to pay into the union benefit funds over and above the employee 

benefits that we already provide, and we will be exposed to new liability under 

federal pension laws. We will also be unable to use our normal work crews and 

will have to operate under different and expensive work rules. The majority of our 

craft employees is cross trained and is, therefore, able to work from the 

commencement of the construction project to its completion. Signing a union 

project labor agreement will make us less productive and less efficient, with no 

increase in quality or safety. 

If Nova did sign a union project labor agreement, we would have to factor the 

increased costs into our bid. Either way, the costs to the government for 

construction projects will increase if a union-only PLA is imposed. 

Finally, I must take issue with the Council's failure to find that this Rule will have 

a significant economic impact on a substantial number of small entities. As stated 

above, many small entities perform work as subcontractors on projects whose 

total cost exceeds $25 million. In fact, we subcontract well over 60% of all work 

to small businesses, the majority of whom are not signatory to any union 

contract. Under the Proposed Rule, all subcontracts on such projects, no matter 

how small, will become subject to the union project labor agreement and will 

suffer the discrimination and increased costs referred to above. For this reason 

alone, the Proposed Rule must be rescinded so that a Regulatory Flexibility 

Analysis can be performed as required by law. 

For all of these reasons, the Proposed Rule is arbitrary and capricious and 

contrary to federal law. No federal agency should be allowed to force bidders to 

sign a union project labor agreement as a condition of performing federal 

construction work. My personal experience with federal construction projects 

shows that union-only PLAs are unnecessary and discriminatory favoritism. They 

will do nothing to achieve the goals of economy and efficiency in federal 

procurement; instead they will have the opposite result of injuring competition, 

reducing the number of bidders, and increasing costs to taxpayers. 
52 

AttachInent B 
53 

A IT ACHMENT TO ABC COMMENTS FILED 

IN RIN 9000-AL31, FAR CASE NO. 2009-005 

Associated Builders 

and Contractors, Inc. 

ABC MEMBER RESPONSES TO JUNE 2009 SURVEY REGARDING 

PLAS ON FEDERAL CONSTRUCTION PROJECTS 

ABC asked its members whether they had performed any construction projects for the U.S. 

government in which the total cost of the project (not just their portion) exceeded $25 mill ion. Out of 

239 responses, 35% said that they had. Those affinnative responders were then asked to "help us 

explain to federal procurement officials why government mandated PLAs discriminate against merit 

shop workers and hann taxpayers." Narrative responses were received from 69 contractors and are set 

forth below: 

1. (Respondent 80045, AR, Specialty Subcontractor) Our company relies on very talented labor that 

perfonns multiple tasks involving many trades such as concrete, carpenter, steel erection, welding, 

piping, etc. PLAs implement inefficient union work rules that prevent our workers from 

completing tasks in multiple trades. 

2. (Respondent 80075, IN, Sprinkler Subcontractor) PLA supporters and union only contractors fail 

to recognize that the union business model is a failed model. Union construction has declined to 

less than 15 percent of the work force for a good reason. Merit shops perform work as good and in 

most cases better than union shops, and pay competitive wages that are detennined by "MERIT" 

not entitlement or government intervention. Our fitters are crossed trained in fire alann and fire 

sprinklers. We often perform both work elements on the same job with the same man and this 

economy reduces the cost of the project. PLA', would force a much higher cost because the union 

must enforce work rules preventing such economies. 

3. (Respondent 80040, Owner, NJ, Specialty Subcontractor) 1. My employees will be unable to 

participate in a project that is financed with their tax dollars. 2. My employees are mostly Black or 

Hispanic. In this area of the country unions have historically discriminated against them. This 

pattern will not change in the future as the labor unions continue to operate as "an old boys club". 
54 

3. My employees prefer to manage their own fringe benefits, after all, it is their money. They prefer 

the freedom of choice. 4. Economic theory and common sense dictate that the restriction of supply 

always leads to higher prices. 5. A PLA is the closest thing to legalized racketeering we have ever 

seen in the history of our nation. It is akin to the protection rackets the Mafia was famous for. 

Really, use my people and follow my rules and we will ensure labor peace. If that is not 

racketeering, please tell me what is? 6. Some or all of my employees would not be able to work on 

the project. It is difficult to factor the loss of your productive workers and new unfamiliar workers 

that may not be trained in our construction sequencing (or have the proper skills to get the job 

done) into a bid. 

4. (Respondent 79931 Owner, CA, Mechanical Subcontractor) When we work on federal projects 

covered by a PLA we have to pay benefits into a union fund which our workers will never receive. 

We will also have to use union workers that have never worked for us and have no loyalty to us 

and no incentive to do a good job. We will not be able to use ABC apprentices on these projects. 

because of these and many other reasons we will not bid on these project so this makes it a form of 

discrimination. 

5. (Respondent 80205, FL, Mechanical Subcontractor) Adding PLAs will limit competition as unions 

represent a small portion of the employees within the construction industry. OUf employees choose 

not to join the union and to make their own decisions and have their own opinion with regards to 

employment issues. In fact we have several employees who in years past were represented by 

unions and chose to leave the union as they felt the union was a hindrance to their opportunity for 

success. If PLAs are instituted, the merit shop firms and their employees will effectively be denied 

access on these projects. 

6. (Respondent 80099, CA, Electrical Subcontractor). This has the potential to take away more than 

75% of the competitive labor force on federal construction projects. 

7. (Respondent 80016, GA, Owner, Specialty Subcontractor) Federally mandated PLAs would put my 

company at a disadvantage by restricting us from hiring the long-term, non-union employees whom 

we have trained to be successful in our business and forcing us to hire employees through Union 

hiring halls. In addition, we would be forced to pay Union benefits, even though none of our nonUnion employees would receive those benefits. 

8. (Respondent 80053, NY, Owner, Concrete Contractor) ON A PLA PROJECT WE CAN NOT 

EMPLOY OUR REGULAR EMPLOYEES. 

9. (Respondent 80073, FL, General Contractor). In Florida only 3% of construction companies are 

union and a PLA would mean that we would have to bring 97% of the workforce from outside the 

state which harms local companies and imposes higher costs on projects. 

10. (Respondent 80023, CA, Owner, Specialty Contractor, Small Business Owner) We all have a right 

to choose -- where we live, how we live, what we eat, with whom we associate. For whom we 

work is no different. Our employees have chosen to work for us. We have not hidden from them 

the fact that we are a merit shop and not a union signatory. They have made a choice and no 

government institution or promulgation should violate that choice. If our employees want to work 

for a union signatory contractor there is nothing that prevents them from exercising that choice to 

do so but the fact that they are with us indicates their vote. They have decided that they don't want 

2 
55 

to pledge allegiance to their union hall and not their company. They want to work for a company 

that doesn't send them back to the hall when business is slow, that looks after them and their family 

and, in effect, becomes an extension of their family. 

II. (Respondent 80078, NY, Owner, Specialty Contractor) As an open shop contractor, PLAs will 

prevent our company from bidding on public and federal construction projects because as a 

specialty contractor, we cannot afford to hire people out of a union hall with no experience in our 

trade. Most PLAs call for 75% union affiliation and 25% of your own people. Why would I want to 

hire three people to sit and watch my own people perform the work because they don't know how 

to do it? This is extremely expensive and is a waste of the taxpayer's money. In addition, PLAs 

allow labor to come from out of town rather than in your own neighborhoods. In Upstate New 

York, 80% of the construction workforce in open shop, so a PLA project means that the labor will 

come from out of town to do the work. How does this help the local people, who will be on the 

outside of the construction fence looking in and asking why they are laid off when workers 300 

miles away are doing the work? 

12. (Respondent 80068, NY, Owner, Specialty Subcontractor) As a pavement marking subcontractor 

on highway projects, our crews are on the project sporadically, not every day. As such, they would 

not work the total number of hours required by the PLA to take advantage of any of the benefits 

provided by the union. The dues they would pay, along with the fringe benefit portion of their 

hourly wage, would go to the union. The union in tum would receive these dollars and have no 

obligation to provide the employee with benefits. This would be a windfall for the union and a loss 

for the employee. The employee would still need to arrange health and other benefits outside of the 

union umbrella. 

13. (Respondent 80092, NY, Owner, Specialty Subcontractor) I) If Demco works under a PLA we 

cannot use our own people, obviously putting them out of work. This places union workers in a 

better position to get the work that they cannot win in the marketplace just because their leadership 

bought the President's allegiance with campaign financing. This is corrupt. 2) The mEW has sworn 

to put us out of business in a letter to their membership. We would have to hire workers loyal to 

them and be subject to all of the costly tactics of salting. 3) Union workers' productivity is less 

than our workers and we have no way of knowing what productivity factors to apply to estimates if 

forced to use their workers. 4) Taking bidders out of the marketplace who have a history of 

competitive success obviously raises the cost to the taxpayer. You can't print money forever, so, 

eventually this means fewer projects and lower employment. 

14. (Respondent 79967, NC, Owner, Specialty Subcontractor) As a firestop Contractor, we work for 

the drywall, hvac, plumbing, electrical, mechanical, masonry and telecommunication contractors. 

The unions do not have the trained firestop installers to perform the fircstop correctly. If the 

firestop on the project is not claimed by a single union then a firestop specialty contractor would 

have to belong to all the unions that apply for the different trades, with separate foreman and 

installers and bookkeepers for each union. It would also significantly increase the cost of the 

project as much as four percent of the overall cost of the project. Seventy-five percent of our work 

is military or government work and I would have to layoff my employees and close our business if 

I had to deal with this. 

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15. (Respondent 7995, MD, Specialty Subcontractor) IF I HAVE TO PAY UNION DUES THE END 

RESULT IS I AM GOING TO PASS ON TO THE CUSTOMER WHATEVER THE ADDED 

COST IS. I AM SURE EVERY NON-UNION COMPANY WILL DO THE SAME. 

16. (Respondent 80465, CO, worker, Specialty Subcontractor) The percentage of merit workers in the 

Rocky Mountain Region out-weighs the union worker. Federally mandated PLAs will lead to outof-state union workers taking local jobs, and Colorado will lose tax revenue and will continue to 

have workers on their unemployment rolls in this slow economy. America is based on capitalism 

and if there is a mandate for union labor, then this is taking the very right to be an American away 

from us as merit shop workers. 

17. (Respondent 79974, CA, Electrical subcontractor) PLAs require that merit shop contractors 

participate in union mandated retirement and benefit programs, which benefit onl y union members 

and contractors. This simply increases the overall cost of construction, thus wasting taxpayer 

money, as well as providing union contractors (who employ just 20% of the construction 

workforce in California) with an unfair bid advantage. Davis-Bacon laws already mandate that 

merit shop contractors pay their workers union wages on federally funded projects. Adding PLA 

requirements only inflates the overall construction costs that much more and it will discourage 

many merit contractors from bidding on this work. 

18. (Respondent 79947, FL, Mechanical Contractor) We cannot agree to a labor agreement when we 

are an open shop merit based contractor. We employ upwards of 300 tradesmen that the labor 

agreement could potentially put out of work. The effect of this order on the income of tradesmen 

families would be catastrophic. Using a labor agreement does not allow us to reward personnel 

based on indi vidual performance or provide the correct skill level of personnel based on the 

project's needs. Labor agreements are a potential disadvantage for merit shop contractors as we 

bid projects based on the history of our merit shop worker production rates, some of which have 

worked for our company upwards of 20years, so we know what production rates that we can 

project at bid time. Having to use a labor agreement will not allow us to provide an accurate 

forecast of labor cost. 

19. (Respondent 79957, CA, Electrical Contractor) Studies across the nation have demonstrated costs 

dramatically increase when a PLA is implemented. Furthermore, open shop employees do not want 

to pay union dues to work on a project or pay into a union pension plan because they will never see 

a dimc of that money! "Open shop" contractors do not want to pay into a union Health & Welfare 

program or union trust fund because they have their own benefits program and would have to pay 

twice. Lastly, PLAs are exclusionary and discriminatory "union only" agreements in which 85% of 

the available labor is frozen out of publicly funded construction! 

20. (Respondent 80061, MD, Employee, General Contractor) I know that by watching our costs, we 

are able to bid competitively. We make money and are able to hire people because everyone is 

accountable. A union environment would destroy any incentive to control costs and eventually cost 

the taxpayers even more money which I personally object to. 

21. (Respondent 79989, MD, Manager, General Contractor) Our employees, if allowed to work on a 

union job, would be required to contribute to the union funds which would never benefit them. 

Unions will make us less efficient, less safe, & increase our costs, which will ultimately cost the 

taxpayers more money. I personally think it is discriminatory to require us as a successful, large, 

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57 

merit shop contractor to be a signatory to a PLA. I believe the mai n reason the unions & Obama & 

his Congressional cohorts are pushing for these PLAs is to help bailout the unions wi new "blood" 

dues since their pension funds are in trouble & they can't properly fund their pensions, etc. w/out 

outside monies. This PLA arrangement is a terrible idea, like so many of this administration's. 

22. (Respondent 8029, CA, Owner, Specialty Contractor, Small Business) If I have to sign one time 

agreements with the unions to do ajob, my employees & myself as the employer have to pay twice 

for medical benefits none of which they will ever receive from the union, because they will never 

work enough hours to qualify. Second, it drives up the cost of the job significantly and at a time 

where we are hearing our President tell us how he is trying to keep jobs and save money, this is 

sending the wrong message. Small businesses like mine provide 60% of employment in this nation. 

By not allowing us to perform these jobs during this economic crisis, this order will surly put us all 

out of business. This would put 34 families out of work and 25 children at risk of losing homes and 

food if their parents are not able to work for me. 

23. (Respondent 79938, MA, Owner, Specialty Contractor, Small Business) No one in the unions are 

trained in my specialty, therefore,joumeyman's wages are paid to teach them the trade. 

24. (Respondent 79953, OK, Large General Contractor) PLAs as well as Davis Bacon will require that 

all trades abide by the jurisdictional requirements established in the 1930's. As with any other 

business, the construction industry has changed since this time period. We no longer train 

personnel in just one trade, we cross train them to perform many tasks so we can keep them as 

employees for the duration of the project. Our employees perform general labor, carpentry work, 

cement finishing, iron work (tying rebar and miscellaneous steel), and operate small equipment 

such as bobcats and lulls. If they perform different types of work in one day, which is normal, we 

are required to report their hours worked in each established trade, and pay them differently for 

each task which is ridiculous and a waste of time, resources and money. 

25. (Respondent 80338, CAl All PLA discriminate. First, If only unions can bid on a project the price 

of the project is inflated. The prevailing rates are artificially high in the first place. It does not mean 

the quality is any better in most circumstances. Everyone should have the chance to bid on projects 

unless they do not play by existing rules and regulations. 

26. (Respondent 80059, UT, Owner, Specialty Contractor) We are a specialty subcontractor. No 

unions really cover the scope of our work. Therefore. we have to employ various trades that have 

no training for our jobs. This results in the necessity to utilize several different union workers to do 

the work of a single one of our workers. The inefficiency and added costs are tremendous. 

Obviously, we try to bid these higher costs into our proposals, but the end user (in this case the 

government and taxpayer) pays an extraordinary amount for basically the same product. 

27. (Respondent 80054, MO, Owner, General Contractor) My company is open shop. We train our 

employees to be multi-craft professionals. We pay our employees the base wage plus fringes on 

their check. If we sign a PLA the empolyecs' pay would be reduced between 20% to 30% and that 

money would go to the unions for which the employees would get no benefits. On top of that our 

company would be tied to pension plans with unfunded liabilities for which our company may have 

to pay at the conclusion of the agreement with the unions. 

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28. (Respondent 80179, TN, General Contractor) We have no problem finding qualified workers and 

the additional job rules via the PLA would create wasteful spending 

29. (Respondent 80031, MS, Owner, Concrete Supplier) Limits the number of companies that can 

perform work on projects; adds higher costs due to control by labor; unfairly picks "selected 

companies" that meet union or labor requirements. 

30. (Respondent 80019, KY, Specialty Subcontractor) Our company and workforce opposed 

government mandated PLAs for obvious reasons. PLAs put more burden on ajob with union 

mandated excessive and inefficient rules and labor jurisdiction issues. Not to mention the added 

costs involved dealing with unions. Prevailing wage is bad enough but utilizing the labor unions to 

govern a job is just plain wasteful and not efficient. Non union workers, which comprise 85% of 

the U.S. construction workforce, remain non union for a reason. They enjoy less hassle, and are 

more productive and better employees, etc. Unions offer nothing except more costs. 

31. (Respondent 80039, CA, General Contractor) PLAs reduce the number of contractors bidding a 

project and drive up costs. Costs are driven up in several ways: 1) By reducing the number of 

general contractors bidding the project - supply and demand always shows the cost will go up. 2) 

As a general contractor, if my pool of subcontractors is restricted, those costs go up and I have to 

pass them on to the Owner [taxpayer]. 3) If I chose to have my employees work on the PLA job I 

now have to pay into the union for their benefits [that they will never see] plus maintain their 

existing benefits, raising my labor costs which will get passed on to the Owner. 4) By requiring me 

to use an unknown workforce (those from the union haH) I have to put more money in the job to 

account for unknown productivity, vs. known productivity of our existing crews. 

32. (Respondent 80008, W A, Owner, Specialty Subcontractor) They add cost to the project with out 

adding value. As an employer we treat our people fairly, communicate directly and allow people to 

excel based upon their efforts and abilities. This ultimately leads to greater efficiencies and value to 

the taxpayer. 

33. (Respondent 80395, TN, General Contractor) When required to utilize union labor, the total cost of 

the job increases; therefore increasing the cost to the taxpayer. In an economy such as ours, I 

consider this nothing short of stealing from our citizens. 

34. (Respondent 80123, NY, General Contractor) PLA agreements discriminate against open shops by 

requiring them to hire union labor regardless of skill or qualification of that labor for the job. 

35. (Respondent 80484, NY, Electrical Contractor)The government mandated project labor agreement 

will eliminate open and competitive bidding and will increase construction costs. The Government 

should not be in the business of dictating contracts that are directed to market specific groups or 

organizations. 

36. (Respondent 80088, PA, Electrical Contractor) The PLA Executive Order will cut out a lot of the 

competition and provides only for organized labor. Additional costs to the taxpayer as a result of 

PLAs is not good government policy. 

37. (Respondent 80080, PA, Specialty Contractor) We provide, install and start-up a specialty control 

system to a certain government agency that we would in tum have to subcontract to a union 

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59 

installer to complete the installation portion under this Executive Order 13502. This in turn causes 

(we have had to hire a union sub on PLA projects before) the entire price to balloon way out of 

normal price range due to the fact that there are the following: Additional overhead of the union 

subcontractor, our project management time is greatly increased due to an installation crew that is 

not properly trained on the system as our in house non-union crews are (training is not a one or two 

day course, we continuously train our employees since the system changes regularly), our start-up 

time is greatly increased due to mistakes and not properly installing due to training as described 

above. We know this from experience not from a hunch or guesswork. 

38. (Respondent 80017, PA, Employee, General Contractor) We can keep the bidding completive, by 

keeping cost down. Everyone has the right to work. Any other means of bidding is discrimination. 

39. (Respondent 79984, KS, Electrical Contractor) PLAs discriminate against our employees by 

forcing them to join a labor union in order to work on those projects. They inflate the cost of these 

projects to the taxpayer by imposing these regulations, instead of letting the free market system 

work as it is intended. I liken it to placing a tariff on the majority of the construction workers in 

this country. How is it fair that we as taxpayers are excluded from working on the very projects 

that our tax money is paying for? 

40. (Respondent 80052, MO, Specialty Contractor, Woman Business Enterprise) Our Company hires 

insulators. The DB wage on a current federal project over 25M we have is $29.64 base +$12.76 

fringe. Our Company pays for health, life, dental, vacation, and training, but do not take a credit 

for these benefits as allowed by the law. We pay half of the fringe as gross wages and half into a 

retirement account which employees are vested in day one. So, on this job our employees receive 

$36.02lhr gross pay + $6.38lhr into their retirement accounts. Our portion of this project is 2176 

man hours. If this job were subject to PLA, the employees would receive $13,883 less in wages 

and $13,883 less in retirement benefits, plus have to pay union dues of $1.37lhr totaling $2,981. 

The unions would receive $27,766 + $2981 = $30,747 with no expenses, and the employee would 

get 33.3% LESS in wages and benefits. 

41. (Respondent 79993, TX, General Contractor) PLAs exclude qualified workers and their employers 

from bidding on projects, which decreases competition and increases cost. This country is built and 

fosters free enterprise. PLAs prevent free enterprise, by excluding the individuals it is designed to 

protect. 

42. (Respondent 80033, CO Industrial Contractor) Our employees work with our clients to build a 

better project and our clients have come to expect that of us. If we work Union, we are not the 

same company and our clients will not be able to rely on the same service they have come to 

expect. As a merit shop company working on a federal construction project, we have to pay the 

prevailing wages. Prevailing wages equalize merit shop company's wages and benefits with a 

union company as these rates are almost always set to union scale. On these same projects, the 

unions do not have to pay the same scale to apprentices as they do journeyman, a merit shop 

company does not get the whole benefit of this difference. So the reality is that the union 

companies already are getting a more competitive advantage on federal projects. Lastly, if any 

government agency selects one group over another and eliminates the opportunity for free 

enterprise and free choice, that agency goes completely against the constitution and basis for which 

this country was founded. 

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43. (Respondent 80095, IN, Owner, General Contractor, Small Business) With PLAs construction 

costs will balloon .. PLAs will virtually destroy the competitive advantage that local and state 

governments enjoy today. As a small business owner, I will not bid projects with PLAs simply 

because we believe in the free enterprise market and our employees believe in freedom of choice 

and the right to work and I will not betray them. Years ago we were a union shop and our 

employees carried union cards. As a union contractor we were held hostage and our workers were 

the ropes that tied us. Due to this "we control the worker by which we control you" mentality of the 

union bosses, we lost customers and our workforce. We made a decision not to sign a new contract 

with the union and our employees took withdrawal cards and stayed with us. Since that time our 

employees have been approached many times to rejoin the rank and file and on every occasion they 

have said no. It is because of this that I will not bid a project with a PLA. 

44. (Respondent 79936, PA, Employee General Contractor) PLAs inflate the cost of the project thus 

costing tax payers more while at the same time forcing the contractor to staff and execute projects 

following union guidelines which ultimately makes the contractor less profitable and limited in his 

ability to perform. 

45. (Respondent 79934, KY, Specialty Contractor) PLAs will effectively exclude the majority of 

construction companies and their employees in the area from working on the projects (In 

Kentucky, 90% of construction employees are open shop and only 10% are union) .• PLAs will 

drive up the cost of the project by effectively eliminating competition from open-shop contractors . 

• PLAs will preclude many local contractors and their employees from working on the projects 

even though their tax dollars are paying for the project. • PLAs will provide less access to skilled 

manpower on the projects .• In 2006 Gov. Jerry Abramson and Gov. Ernie Fletcher agreed to veto a 

any attempt to implement a PLA for the New Downtown Arena in Louisville, KY. They both 

stated that wanted all workers in the metropolitan area to have an opportunity to work on the 

project. If PLA had been used, only union workers would have been working there. Which as you 

can see above is a small portion of the workforce in Kentucky's largest city. 

46. (Respondent 80003, PA, General Contractor) PLAs have an inherent level of inefficiency due to 

mandated jurisdictional definitions which alters crew make-up or prohibits use of composite crews, 

often resulting in higher net crew rates. - PLAs restrict the use or transfer of key personnel, and/or 

"name-hiring" resulting in inefficiencies because crews are not as familiar with work methods or 

procedures a~ are merit shop crews that have worked together for many years. PLAs negatively 

impact subcontracting opportunities, particularly DBE's are limited to union-shops, resulting in 

increased cost. - - - PLAs are inflexible with respect to times of work (split-shift, etc), shift hours 

(4xlO's, etc), make-up days, travel time, etc. which require additional contingencies and 

inefficiency costs to be included in bids. - - - PLAs contain restrictions on allowing equipment 

operators to operate multiple pieces of equipment in a shift .... or allowing a "non-operator" to 

operate equipment on an as-needed basis ... results in additional cost etc. 

47. (Respondent 80039, PA, Owner, Specialty Contractor) My company has a core group of 150 

construction employees. If we were forced to use union employees, our own employees would be 

home on layoff. 

48. (Respondent 80330, CO, General Contractor) It took years to get away from the corrupt thugs that 

run the unions. To go back to that would be six steps backwards. They have nothing to offer our 

employees that we don't already provide. Our employees would have less pay, benefits, and 

8 
61 

stability with a union and would not want to be assigned to that project and forced to pay union 

dues. The union has robbed from their own pension fund to buy politicians and offers no security to 

their members for retirement. The retirement funds that our employees eam are part of a protected 

plan. Union work rules protect lazy under perfonning workers and inflate the cost of the project for 

the tax payer. 

49. (Respondent 80021, TN, Specialty Contractor) PLAs prevent the large majority of workers - merit 

shop workers - from working on government projects that they fund as taxpayers. It's the worse 

kind of discrimination the Federally mandated kind. 

50. (Respondent 80105, NY, General Contractor) PLAs restrict competition and take away an 

individuals' freedom of choice. PLAs harm the taxpayer by increasing construction costs due to the 

inefficient labor structure forced by the unions. 

51. (Respondent 79939, WA, Electrical Contractor, Small Business, Woman Business Enterprise) We 

are frequently only a small subcontractor on a much larger project-way down the food chain. We 

are unable to afford to bid on PLA only projects-the costs are too high. We are an open shop and 

our employees have chosen not to join a union. But they should have the opportunity to work on 

projects that are funded with their tax dollars. 

52. (Respondent 80064, MD, General Contractor) Mandated PLAs force merit shops to take on 

additional cost in the form of effort, time, and money spent on securing the PLAs as well as the 

need to maintain two sets of pricing data for bidding work with and without PLAs. Finally, there is 

the obvious corresponding rise in labor costs associated with a PLA. That's three ways in which a 

merit shop incurs additional cost when bidding work which requires a PLA. Those costs are 

reflected in our price to the owner (i.e. the government and therefore all tax payers). Rather than 

forcing additional time, effort, and expense (all of which eventually gets passed on to the 

taxpayers), why not let merit shops and union shops compete as they are without additional rules? 

If unions really add value to their companies, they need not fear direct competition with merit shop 

companies. 

53. (Respondent 79952, NJ, Owner, Specialty Contractor, Women Business Owner) Merit shops are 

run by good, hard working people, and provide safe work areas, good pay and benefits. We and our 

employees are very capable of managing our own company, without paying an outside entity to 

disrupt our daily activities. The paperwork and other extra costs to implement a PLA is absurd. We 

would not have to have tax increase if we would just STOP the waste within government. There are 

many laws in place to protect everyone from everything. A PLA ends up providing money to a 

private organization who harasses merit shop businesses. Unfortunately, merit shops do NOT have 

any laws protecting them (without great cost to then merit company, and none to the Unions). I just 

can't believe this is legal and/or constitutional. 

54. (Respondent 80070, NY, General Contractor) PLAs actually cost taxpayers more money and tend 

to bring in non-local labor to build major public work projects. With 85% of the construction 

industry merit based, a PLA completely restricts the majority from building the project. Unions 

would argue that quality suffers. Are Toyota vehicles built by non-union labor of less quality than 

GM or Ford vehicles. I'd say they are comparable. 

9 
62 

55. (Respondent 80067, PA, Specialty Contractor, Small Business Owner) Besides being harassed by 

unions and threatened, we are forced to burden tax payers with the extra costs with union work 

rules and other requirements within typical PLAs. Our company pays very fair wages, has 

insurance and 401 K plans. The government needs to be fair to all taxpayers as well as allowing the 

small businesses to survive in the never ending union favoritism the government is showing. Go 

after the small guys who don't have fair wages and plans for their employees - not the upright small 

businesses who are fair and using their right to free enterprise. 

56. (Respondent 80038, CA, Electrical Contractor) A properly administered certified payroll 

compliance process will confirm total compliance with Davis Bacon and make sure wages and 

benefits are equal between union and non-union workers. A Merit contractor would have to 

contribute to two separate employee benefit programs, such as pension and medical benetit plans. 

The Merit contractor would have to continue to offer the plan he has been offering to his 

employees and also make contributions to the Union sponsored benefit programs. Employees of the 

Merit contractor may never reach eligibility to receive benefits under the union's benefit plans and 

the contractor does not want to place his employees in this situation. A Federal PLA excludes its 

own taxpayers from working on a project that is using their tax dollars to build. The PLA prohibits 

a Merit shop federally approved apprentice from earning on-the-job hours of experience to 

company apprentices. 

57. (Respondent 80316, CO, Specialty Contractor) PLAs increase the cost of construction, require 

contractors to adjust their benefit packages to conform to the PLA, and do not allow the contractors 

to utilize their existing workforce unless the workers join the union. 

58. (Respondent 80316, NY, Specialty Contractor) PLAs would effectively force us to use union 

workers in lieu of our own workers. Some of our existing crews have worked together for years 

and have increased efficiency as a result. Using a large number of union employees who may not 

have our company's best interests as one of their goals may cause problems between work groups. 

Also, as a result of being forced to hire union workers we might be force to layoff existing 

workers. PLAs are the "poison pill" that we cannot accept which leaves union only finns with less 

competition which is exactly what PLAs are really all about. 

59. (Respondent 80081, MD, Specialty Contractor) PLAs result in overinflated costs with less 

production. Union members have no motivation to put forth any more effort than the minimum 

required. I know many of them well, we are friends but our work ethics are complete opposites. 

Furthermore, our company has struggled with the same obstacles as any other company. Our 

employees taxes will go to fund projects that they will not even be permitted to work on unless we 

agree to a PLA. This sounds less like government and more like organized crime. This 

administration is hell bent on bankrupting the entire country. 

60. (Respondent 80032, MS, Specialty Contractor) PLAs are a disgrace to American owned 

companies. They contradict the most basic rights as an American such as free enterprise. Why 

would you want to limit your choice of contractors to ones with additional burden? Open Shop 

contractors save taxpayer dollars. 

61. (Respondent 80462, TN, General Contractor) PLAs drive up cost and reduce competition. 

Reputable contractors will use fair practices and obtain qualified and competitive market labor that 

provides the best value to the taxpayer - they do not require government mandates. PLAs put the 

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63 

free market process at risk. Federal procurement officers should focus on qualifying the bidding 

contractors in lieu of taking bids from anyone and then saddling the project with unnecessary 

restrictions such as PLAs. 

62. (Respondent 79961, NY, Mechanical Contractor) I would not be bidding on projects with a 

government mandated PLA. On projects where we would have been the theoretical low bidder, the 

federal and state taxpayers would therefore be paying MORE than needed to have the same work 

accomplished by a firm willing to sign a PLA. PLAs reduce competition. 

63. (Respondent 80298, TN, Concrete Contractor) Unions cost the taxpayer more money. I see it 

firsthand on jobsites. And while everyone thinks the unions offer more benefits, they are dead 

wrong where our company is concerned. This discrimination should be against the law. The 

taxpayers are the ones taking it in the shorts when the government artificially limits its awards to 

union companies and the few open shop contractors who are willing to sign a discriminatory and 

costlyPLA. 

64. (Respondent 80015, NM, Specialty Contractor) Signing a PLA raises my costs and exposes my 

workforce to union organizing and intimidation. My company offers competitive wages and 

benefits. Our workers are more efficient because we are not subject to union work practices. Our 

trades people undergo apprenticeship training and are just as skilled as union workers, but have the 

flexibility to innovate execution methods to achicve shorter schedules and lower costs. They would 

not be allowed to work on typical PLA projects. 

65. (Respondent 79990, TX, Mechanical Contractor) If a person tests out to be a journeyman then that 

is what I pay them. If they test out less than a journeyman then they get paid less because they are 

not as skilled and knowledgeable about the trade. If they are a Union members they get paid a 

fixed amount without any field qualification. PLAs implement the inefficient union business 

model. 

66. (Respondent 79972, NJ, Specialty Contractor) The fact of the matter is our company is qualified to 

federal work now with our own manpower. My company is cross trained in the HV AC trade. Each 

installer is capable of fabricating ductwork, installing ductwork insulating ductwork installing pipe 

work and also insulating. Start up and testing is also done by our own workforce. This practice 

makes us more productive which allows more competitive pricing. We do not have restrictive work 

rules that cause several different trade unions to be involved in a project along with restrictive work 

rules. 

67. (Respondent 80398, TN, Electrical Contractor) We recently completed a $40million dollar project 

for the Oak Ridge National Labs that was awarded to myself and other merit shop contractors 

because of our low bid. We competed with union contractors who were not competitive in their 

pricing. The owner received his project on time, on budget and was happy with the end product. 

The government is presently constructing a $60 million project adjacent to the project we just 

completed, but we cannot compete because it has a PLA agreement. We are not afraid of 

competition, and Davis-Bacon has worked in the past, why are we locked out in working in 

projects in our own back yard? 

68. (Respondent 80048, NY, Specialty Contractor) I. PLAs discriminate against our workers, who 

have decided that they do not want to belong to a labor organization. 2. PLAs increase the costs for 

II 
64 

the projects which will thereby increase the costs to the taxpayer. 3. Fewer projects will be able to 

be constructed due to higher costs, therefore reducing the number of workers that will be employed 

in the construction industry, which already has a high unemployment rate. 4. Benefit money will be 

paid into the union pension funds for which our workers will not have the benefit of. Since PLAs 

are established for individual projects, normally one to two years in length, our workers would not 

be able to gain enough time to be vested in the union benefit plan. 5. Our company would find 

itself less competitive in competing for projects since we would be required to hire from a union's 

hiring hall and be forced to break up our existing team of experienced and loyal employees. 

69. (Respondent 79958, TX, Specialty Contractor) PLAs are a crooked way of promoting unions in 

many open/merit shop states. Why should the worst worker get paid the same as the best hand, 

people should be compensated on their value, not an artificial benchmark. 

12 
65 

AttachDlent C 
66 

Associated Builders 

and Contractors, Inc. 

BEFORE THE CIVILIAN AGENCY ACQUISITION COUNCIL AND 

THE DEFENSE ACQUISITION REGULATIONS COUNCIL 

Notice of Proposed Rule: Federal Acquisition Regulation 

FAR Case 2009-005 

Use of Project Labor Agreements For Federal Construction Projects 

RIN 9000-AL31 

Comments of Associated Builders and Contractors, Inc. 

Associated Builders and Contractors, Inc. (ABC), hereby comments in opposition 

to the Notice of Proposed Rule issued by the Civilian Agency Acquisition Council and 

the Defense Acquisition Regulations Council (the Councils) in the above referenced 

matter. The Proposed Rule purports to implement the President's Executive Order No. 

13502 (Feb. 6, 2009), which for the first time establishes a policy of "encouraging" 

federal agencies to consider imposing union-only project labor agreements (PLAs) on 

federal construction projects whose total costs exceed $25 million dollars. 1 

I See 74 Fed. Reg. 33953 (July 14,2(09). In accordance with the NPR, id. at 33954, ABC is this same date 

tiling separate comments challenging the Councils' failure to conduct an Initial Regulatory Flexibility 

Analysis as required by the Regulatory Flexibility Act, 5 U.S.c. § 601. There is no statutory requirement 

for the filing of such separate comments, however. and ABC objects to this process. The Councils are 

required to consider all comments filed in this proceeding in both its aspects, and ABC hereby incorporates 

its separately filed RFA comments by reference. 
67 

1. ABC's Interest In The Proposed Rule 

ABC is a national construction industry trade association representing 25,000 

individual employers in the commercial and industrial construction industry. ABC 

represents both general contractors and subcontractors throughout the United States. The 

majority of ABC's member companies are "merit shop" companies, whether unionized or 

non-union, who support and practice full and open competition without regard to labor 

affiliation. The merit-shop philosophy helps ensure that taxpayers and consumers alike 

receive the most for their tax and construction dollars. 

Conservatively, ABC's members employ more than 2.5 million skilled 

construction workers whose training, skills, and experience span all of the twenty-plus 

skilled trades that comprise the construction industry. The Bureau of Labor Statistics 

(BLS) most recent report states that the non-union private sector workforce in the 

construction industry comprises more than eighty four (84) percent of the total industry 

workforce. 2 

The great majority of ABC's contractor members are classified as small 

businesses by the Small Business Administration. This is consistent with the findings of 

the Small Business Administration that the construction industry has one of the highest 

concentrations of small business participation (more than 86 percent)? At the same time, 

ABC includes among its members many larger construction companies who have 

contracted directly with the federal government for many years in the successful 

construction of large projects of the type that will be covered by the Proposed Rule.4 

ABC and its members, large and small, are greatly concerned that the Proposed 

Rule seeks to implement a Presidential Executive Order which is itself an unlawful 

exercise of power that violates numerous federal laws and the Constitutional rights of 

government contractors and their employees. Specifically, as further explained below, the 

Proposed Rule should be rescinded or greatly modified for the following reasons: 

• The Proposed Rule, and the Executive Order on which it is based, interferes with 

the Congressional mandate that federal agencies should strive to "obtain full and 

open competition" in procurement of government contracts, as set forth in the 

Competition in Contracting Act (CICA).5 The Proposed Rule instead injures 

competition by discriminating against and discouraging bids from non-union 

contractors and by showing blatant favoritism toward a small class of unionized 

contractors on large federal construction projects. 

2 See bls.gov "Union Members Summary" (Jan. 2009). 

3 The Small Business Economy: A Report To The Preside/II, U.S. Small Business Administration, Office of 

Advocacy (2009), at 8. 

4 All of the top 10 companies on Engineering News-Record's 2009 Top 400 Contractors list, and 21 of the 

top 25, are ABC member firms. 

s 41 U.S.c. § 253. 

2 
68 

• The past decade of experience under President Bush's Executive Order 

prohibiting PLAs proves that PLAs are unnecessary to achieve any legitimate 

federal procurement goals. None of the labor-related "challenges" cited in the 

Proposed Rule as purported justifications for PLAs have in fact caused any 

significant delays or overruns on any of the thousands of large federal 

construction projects built during the past decade. 

• The Proposed Rule will not increase the economy or efficiency of the federal 

government's procurement of construction, but will instead achieve only the 

opposite results by increasing costs and delaying construction. The Proposed 

Rule, and the Executive Order on which it is based, therefore exceed the authority 

of the Executive Branch under the Federal Property and Administrative Services 

Act.6 

• The Proposed Rule establishes a new regulatory policy that interferes with and 

discriminates against rights of construction contractors and their employees that 

are protected by the National Labor Relations Act, ERISA, the National 

Apprenticeship Act, and the U.S. Constitution, including the forced taking of nonunion workers' pay for the benefit of union pension plans, without just 

compensation. 

• The Proposed Rule interferes with the Congressional mandate that federal 

agencies should encourage and give preference to small and disadvantaged 

businesses in procurement of government contracts. The Proposed Rule and the 

Executive Order therefore violate the Small Business Act. 7 

• The Proposed Rule promotes discrimination against minority contractors and 

employees, the vast majority of whom are non-union. The Proposed Rule and the 

Executive Order therefore violate the affirmative action principles set forth in 

Executive Order] ] 246. 

• The Proposed Rule improperly declares that "this rule is not a major rule under 5 

U.S.C. § 804" and thereby violates the Congressional Review Act codified 

therein. 

• The Proposed Rule fails to include an Initial Re1ulatory Flexibility Analysis and 

therefore violates the Regulatory Flexibility Act. 

640 U.S.c. § 10 I. 

7 15 U.s.c. § 637(d). 

85 U.S.c. § 601. 

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69 

• The Proposed Rule establishes no meaningful criteria for federal agencies to 

follow in considering whether to impose PLAs on large federal construction 

projects. The findings purporting to support the Proposed Rule are also inadequate 

to meet the standards set forth in the Data Quality Act. The resulting agency 

decisions will be inherently arbitrary and capricious and will delay construction 

projects. 

For each of these reasons, and as further explained below, the Proposed Rule should be 

rescinded or at least significantly modified in order to mitigate the irreparable harm 

otherwise likely to be caused by the President's Executive Order. 

2. The Proposed Rule Violates CICA's Mandate Of "Full and Open 

Competition" In The A ward Of Federal Construction Contracts. 

The foundation for the federal government's procurement requirements is the 

Competition In Contracting Act of 1984 (CICA).9 CICA was enacted to assure that all 

interested and responsible parties have an equal opportunity for the Government's 

business. CICA not only reaffirmed the intent that all procurements be "open", but 

required "full and open" competition. Full and open competition means that all 

responsible sources are permitted to submit competitive proposals on a procurement 

action. CICA requires, with certain limited exceptions, that the Government promote full 

and open competition in awarding contracts. 10 

Of particular significance to the Proposed Rule, CICA expressly bars federal 

agencies from using restrictive bid specifications in such a way as to effectively 

discourage or exclude contractors from the pool of potential bidders or offerors. As the 

Act states, agencies must solicit bids and offers "in a manner designed to achieve full and 

open competition" and "develop specifications in such a manner as is necessary to obtain 

full and open competition.,,11 

Since the enactment of CICA, no President has previously adopted a rule or 

executive order authorizing, let alone encouraging, any federal agency to require 

contractors or subcontractors to sign union labor agreements as a condition of performing 

federal construction projects.12 Nor has any federal court authorized federal agencies to 

9 40 U.S.c. §471 et seq. and 41 U.S.c. §251 et seq. 

10 For a full and recent discussion of ClCA's requirements, see Manuel. Competition in Federal 

Contracting: An Overview of the Legal Requirements (Congressional Research Service April 2009). 

II /d. at 18, citing 10 U.S.c. § 2305(a)(1 )(A) and 41 U.s.c. § 253a(a)( I )(A-C); see also Cohen, The 

Competition in Contracting Act, 14 Pub. Con. L. 1.19 (198311984). 

" The first President Bush issued Executive Order 12818 in 1992 prohibiting the use of PLAs by any 

parties to federal or federally funded construction projects. Though President Clinton revoked Bush's 

Executive Order in 1993, he never issued a contrary Order authorizing federal PLAs during his term. 

Instead, he issued only a "guidance memorandum" encouraging the use of PLAs, which did not have the 

force of law and was not tested in court prior to the end of Clinton's term. In 2001, President George W. 

4 
70 

impose PLAs on federal construction contracts under CICA. 13 Indeed, to ABC's 

knowledge no federal agency has imposed a PLA over the objection of construction 

contractor offerors since CICA's enactment in 1984.14 

As is further explained below and in hundreds of comments filed by contractors in 

this proceeding, the Proposed Rule conflicts directly with CICA by encouraging federal 

agencies to impose PLAs which discriminate against and discourage competition from 

potential bidders, i.e., those contractors who are not signatory to any union agreements. IS 

By showing favoritism towards a narrow class of unionized contractors, govemmentmandated PLAs clearly do not "obtain full and open competition" and are therefore 

unlawful under CICA. 

a. How Government-Mandated PLAs Under The Proposed Rule 

Discriminate Against Non-Union Contractors and Their Employees. 

As defined in the Executive Order and the Proposed Rule, imposition of a PLA on 

a federal construction project would have the following effects: 

First, non-union employees working on a prevailing wage project under a PLA would 

be penalized monetarily, compared to their earnings on the same federal project covered by 

Bush issued Executive Order No. 13202, prohibiting any government mandate of PLAs on federal or 

federally funded construction projects. 

13 In the only case involving a PLA on a federal project where the CICA issue was previously raised, the 

Court of Appeals for the Sixth Circuit found that the agency involved, the Department of Energy, was not a 

party to the PLA, and was not responsible for the actions of the 0&0 Contractor who was the responsible 

party. The court therefore found that subcontractor plaintiffs lacked standing to challenge the PLA under 

CICA. Phoenix Engineering, Tne. v. M-K Ferguson of Oak Ridge Co., 966 F. 2d 1513 (6"' Cir. 1992). This 

case is wrongly reported in an oft-cited GAO Study on PLAs as authorizing DOE to impose PLAs 

notwithstanding CICA, when in fact the merits of that issue were never addressed. See Project Labor 

Agreements: The Extent of Their Use and Related Tnformation, at 5 (GAO 1998). 

14 The above cited GAO study erroneously conflated both government-mandated and purely voluntary 

PLAs in concluding that 26 PLAs were performed on federal construction work in the 1990's. Td. at 2. 

Voluntary PLAs are expressly authorized by the National Labor Relations Act so long as they are entered 

into without coercion by "employers in the construction industry" and "in the context of collective 

bargaining." See 29 V.S.c. § 158(e) and <0. At issue in the present Proposed Rule and the Executive Order 

are government-mandated PLAs which federal agencies are for the first time being authorized to impose 

over the objection of bidding contractors. 

15 As noted above, more than 84% of the construction industry now consists of contractors who arc not 

signatory to any union agreements. hllp:llbls.gov. This represents a total transformation of what was once, 

but certainly is no longer, a union-dominated industry. As describcd in numerous publications by the late 

Dr. Herbert Northrup, unions represented 87% of the industry's workforce after World War II, a period in 

which the industry was notorious for strikes, featherbedding inefficiencies, and discrimination against 

minorities. See NorthrUp, OPEN SHOP CONSTRUCTION REVISITED (Wharton School 1984). Thanks 

largely to the benefits of increased competition for construction services, strikes have become rare, work 

rules have become much more efficient, and minority participation is at its highest levels. 

5 
71 

the Davis-Bacon Act without a PLA. Under Davis-Bacon, without a PLA, such employees 

receive "prevailing" wages and benefits which are equal to those paid to union employees. 16 

On projects subject to a PLA, however, the employees must pay dues to the union, which are 

deducted from their regular take home pay. Such employees would also forfeit significant 

dollar amounts that their employer would be required to pay into union benefit funds. 

Because of the relatively short duration of most construction projects, however, those nonunion employees would receive no benefits from their pension contributions. 

Numerous comments from experienced government contractors filed in this 

proceeding testify to this discriminatory impact on their employees. The comments of Ron 

Fedrick, President of Nova Group, a large and sophisticated Defense Department contractor, 

are representative, and explain the impact as follows: 

[O]ur craft workers will experience a decrease in take home pay if the projects 

upon which they work are subject to a PLA. Nova's health and welfare, 

which includes employee and dependent, and pension plans cost less than the 

union programs. The excess fringe rate is added to the employee's base rate 

in the form of additional wages. One Navy and one Corps of Engineers 

projects illustrate this point. On a Navy project at the Naval Station in San 

Diego, California there were a total of 147,923 crew hours. The total Davis 

Bacon combined fringe benefit was $2,175,657.19. The cost of Nova's 

medical and mental insurance for these hours was $338,197.62 while the costs 

of its retirement plan for these hours were $521,532.80. The excess fringe of 

$1,315,926.77 was paid to the employees. On the Corps of Engineers project 

in Hawaii, there were a total of 74,513.5 crew hours. The total Davis Bacon 

combined fringe benefit was $1,739,399.71. The cost of Nova's medical and 

mental insurance for these hours was $122,029.93 while the costs of its 

retirement plan for these hours were $773,725.87. The excess fringe of 

$843,643.91 was paid to the employees. Under PLA's, on these two (2) 

projects alone, Nova craft workers would lose some $2,159,570.68 in income. 

Many other contractor comments testify to the same impact of PLAs on nonunion workers on federal construction projects. 17 The contractors have rightly noted that 

their employees generally cannot work long enough on any of the particular federal 

projects likely to be covered by PLAs to receive any benefit from the union pension 

funds, due to the multi-year vesting requirements that all multi-employer funds impose. 

Thus, the PLAs necessarily cause employee fringe benefits to be taken from non-union 

workers without any just compensation. IS 

16 See 40 U.S.c. § 3141, el seq. 

17 See, e.g., Comments filed by Hensel Phelps Construction, Facchina Construction, Miller & Long 

Concrete Construction, and hth Construction, among others. 

18 See also Contractor Responses to ABC Survey (July 2009), attached hereto and incorporated by 

reference. 

6 
72 

These and other facts have been recently analyzed by Professor John McGowan 

of St. Louis University in a study that is hereby incorporated by reference.!9 McGowan 

projects that hundreds of millions of dollars will be lost by non-union employees due to 

an estimated 20% reduction in their take home pay on federal construction projects 

subject to PLAs under the Proposed Rule.2o 

Professor McGowan has further analyzed the discriminatory cost to contractors in 

the form of increased and/or duplicative benefit payments that will be required as a result 

of PLAs. He has found that non-union contractors who enter into PLAs would have to pay 

added and duplicative costs directly to the Union for various "benefits and fringes," while at 

the same time paying for many of these same benefits through their own company benefit 

plans. These duplicative costs may include payments for holidays, sick days, and vacation 

time, as well as apprenticeship training, insurance benefits, profit sharing, and company 

contributions into employee 40lK plans. Professor McGowan projects that non-union 

contractors' labor costs will increase by 25% or more under PLA requirements, over and 

above the prevailing wage and fringe benefit costs that such contractors already expect to 

pay under the Davis-Bacon Act. As a result of these (wholly unjustified) cost increases, 

non-union contractors will either be discouraged from bidding or will pass on their 

increased costs to the taxpayers. 

In addition to having to pay these draconian costs, non-union contractors who 

become subject to a PLA are typically not able to use their own employees for the PLAcovered Project. Instead, such contractors are forced to staff the project with union 

journeymen and apprentices with whom they are completely unfamiliar, or else pay penalties 

to the union. Contrary to the Executive Order's stated intent, this requirement will make the 

contractor, and hence the contracting federal agency, less efficient. PLAs also typically 

restrict the ability of non-union contractors to schedule their work crews in any manner other 

than that dictated by the PLA without first receiving "permission" from the designated trade 

union or the designated Labor Coordinator. This again makes the contractor Jess efficient and 

less able to staff the job properly.2! 

The Proposed Rule also discriminates against non-union apprenticeship training 

programs that are supposed to be protected from such discrimination by ERISA and the 

National Apprenticeship Act. In particular, employees of non-union contractors who are 

19 McGowan. The Discriminatory Impact of Union Fringe Benefit Requirements On Non-Union Workers 

Under Government-Mandated Project Labor Agreements (Aug. 2009). available at hupllabc.orglplastudies. 

20 The action of a federal agency in redirecting part of non-union workers' compensation into union pension 

plans from which they receive no benefits constitutes a form of government "taking" without just 

compensation in violation of the Fifth Amendment to the Constitution. At a minimum, the Councils are 

required to comply with Executive Order 12630 and to address the takings implications of the Proposed 

Rule, which has apparently not been done in the current rule making to date. The new government mandate 

also violates employee rights under ERISA, as is further discussed below. 

21 As noted above. non-union employees working under PLAs are forced by government mandate to pay 

dues to labor unions who they have not selected as their bargaining representative. Such a requirement. 

where imposed by a federal agency, will violate the First Amendment right of such employees to Freedom 

of Association. 

7 
73 

forced by federal agencies to sign PLAs will no longer receive credit towards their 

existing apprenticeship programs, and such employees will be forced to emoll in union 

apprenticeship programs (or alternatively, the non-union contractors will be forced to hire 

existing union apprentices instead of their own). 

Finally, non-union contractors who are required to sign the PLA lose the ability to 

hire subcontractors of their own choosing, inasmuch as all subcontractors also must adhere to 

the PLA. Most subcontractors of nonunion contractors are themselves non-union and are 

reluctant to sign a PLA for the reasons set forth above. Numerous contractor comments being 

filed in this proceeding testify to this impact on subcontractors. 

b. PLAs Under the Proposed Rule Will Injure Competition, And Will Certainly 

Not "Obtain Full And Open Competition." 

Because of the significant adverse impact of PLAs on non-union contractors and 

subcontractors described above, the inevitable result of the Proposed Rule will be to injure 

competition for federal construction projects by significantly reducing the number of bidders 

for such projects in direct violation of CICA's mandate. ABC has recently conducted a 

survey of its members as to whether they would be discouraged from bidding by a PLA 

requirement on federal construction projects. In an overwhelming response of hundreds of 

respondents, 98% of these contractors indicated that they would be less likely to bid on such 

work if a project labor agreement were imposed as a condition of performing the work.22 

Previous surveys of non-union contractors (who it must be recalled constitute 

more than 84% of the industry) have reached similar results. Thus. in a study of 

infrastructure contractors in the Washington, D.C. area conducted by the Weber-Merritt 

Research Firm, more than 70% of the surveyed contractors stated that they would be 

"less likely" to bid on a public construction project containing a union-only PLA.23 

Across the country in Washington State, another survey of contractors revealed that 86% 

of open shop contractors would decline to bid on a project under a union-only PLA.24 

Government-mandated PLAs clearly have an adverse impact on competition by 

discouraging such contractors from bidding for government construction work.25 

These survey findings have been repeatedly supported by evidence gathered on 

actual government construction projects where PLAs have been mandated. In March 

1995, a study analyzed the effects of project labor agreements on bids for construction 

22 Newsline (July 22, 2009). available at http://abe.org. 

23 The Impact ofUnion-Olliy Project Labor Agreemellts 011 Bidding By Public Works Contractors in the 

Wushingtoll, D.C. Area (Weber-Merritt 20(0), available at http://abc.orglplastudies. 

24 Lange, Perceptions and Influence of Project Labor Agreements on Merit Shop Contractors, Independent 

Research Report (Winter 1997), available at http://abc.orglplastudies. 

25 Recent PLA apologists have either ignored or overlooked these studies. See Kotler. Project Labor 

Agreements in New York Stale: In The Public Interest (Cornell ILR School 2009), at 14. 

8 
74 

work on the Roswell Park Cancer Institute, where the same contracts had been bid both 

with and without PLAs. The study concluded that, "union-only project labor agreements 

... reduce the number of companies bidding on the projects.,,26 A follow-up study 

conducted on behalf of the Jefferson County Board of Legislators by engineering 

consultant Paul G. Carr found that there was a statistically significant relationship 

between the number of bidders and the cost of projects, concluding that the relationship 

between these two factors does not occur by chance. Professor Carr further concluded 

that a PLA requirement would adversely impact the number of bidders and would thereby 

increase project costs.27 

Ernst & Young agreed with these findings in connection with a study of PLAs in 

Erie County, Pennsylvania, concluding that "the use of PLAs adversely affects 

competition for publicly bid projects. This is to the likely detriment of cost effective 

construction. Our research revealed that the use ofPLAs strongly inhibits participation in 

public building by non-union contractors and may result in those projects having 

artificially inflated costS.,,28 Similar conclusions were reached by the Clark County, 

Nevada School District, which recommended against adoption of any union-only 

requirements on Clark County schools. 29 

Apart from these surveys and studies, specific adverse impacts on competition for 

actual construction projects have been publicly reported on numerous state and local 

government PLAs. These include a sewer project in Oswego, NY,3o the Central 

Arteryffunnel project in Boston,31 schools projects in Fall River, MA,32 Middletown, 

CT,33 Hartford, CT,34 and Wyoming County, WVA, 35 the Wilson Bridge project near 

26 Analysis of Bids and costs to Taxpayers in Roswell Park, New York (ABC 1995), available at 

hup:llabc.orglplastudies. As further discussed below, the study found a direct correlation between the 

reduced number of bids and increased costs on the project. 

27 Carr, PIA Analysisfor the Jefferson County Courthouse Complex (Submitted to Jefferson County Board 

of Legislators, Sept. 14, 2000), available at http://abc.org/plastudies. See also Thieblot, Review of the 

Guidance for a Union· Only Project Labor Agreement for Construction of the Wilson Bridge (Md. 

Foundation for Research and Economic Education Nov. 20(0), available at http://abc.orgipla'tudies. 

" Ernst & Young, Erie County Courthouse Construction Projects: Project Labor Agreements Study (2001), 

available at: http://abc.orglplasLUdiesslErie.pdf. 

29 School District Should Heed Conclusions of Report, Las Vegas Journal, Sept. 11,2000. 

JO Sewer Project Phase Allracis No Bids, Syracuse Post-Standard, Aug. 20, 1997, E-l. 

JI Big BaSIOn bids ill /996, ENR Nov. 20,1995, at 26; Low Bid $22 Million Over Estimate, ENR Jan. 13, 

1997, at 1,5. 

32 The City initially bid three school construction projects under a PLA in 2004. When the projects attracted 

a low number of bidders, the city cancelled the PLA and reopened bidding without the PLA, receiving 

many more bidders and saving millions of dollars. See Beacon Hill Institute, Project Labor Agreements and 

Financing School Construction in Massachusells (Dec. 2006), available at www.beaconhill.org. 

33 State's Dubious Labor Poliq, Hanford Courant, Aug. 20,1998,3. 

9 
75 

Washington, D.C., 36 and the San Francisco International Airport project.37 These and 

other incidents of government-mandated PLAs depressing the number of bidders 

dramatically below project managers' expectations are too wide spread to be ignored. 

They have been compiled and described in detail in a comprehensive Report that is 

incorporated by reference and made a part of these comments.3S 

Proponents of union-only PLAs have attempted to rebut the overwhelming proof 

of reduced bidding on public PLA projects by claiming that a significant number of nonunion contractors bid for work on the union-only Boston Harbor project and/or on the 

Southern Nevada Water District project, two large state PLA projects built in the 1990s.39 

In each case, however, the claims of significant non-union participation on these PLA 

projects turned out to be grossly exaggerated.4o Moreover, the fact that some non-union 

contractors may be so in need of work at a given time that they accept and comply with 

discriminatory PLA bid specifications in an effort to obtain jobs does not constitute "full 

and open competition" within the meaning of CICA. 

It therefore remains clear that government-mandated PLAs injure competition, 

and certainly do not "obtain full and open competition" as required by the Competition in 

Contracting Act. As the Supreme Court of Rhode Island held upon consideration of a 

PLA in that state: "PLAs deter a particular class of bidders, namely, nonunion bidders, 

from participating in the bid process for reasons essentially unrelated to their ability to 

34 School Project Back in Limbo, Hartford Courant, April 7, 2004. 

35 New Wyoming County School to be Rebid. Associated Press, Dec. 20,2000. 

36 Lone Wilson Bridge Bid Comes in 70% Above Estimate. Engineering News Record, Dec. 24, 200 I; see 

also Baltimore Sun, March 2. 2002. 

37 Labor Protests Fly. Bids Are High. ENR. July 22, 1996. at 16. 

38 See Baskin, Government-Mandated Union-Only PIAs: The Public Record Of Poor Performance (2009), 

available at htlp:llabc.orglplastudies_ 

'" See, e.g., Kotler, supra n. 20. 

4() The Boston Harbor claim was based upon a letter from the project's construction manager asserting that 

16 open shop general contractors and 102 open shop subcontractors performed work under the union-only 

requirement. However. a further study of the facts underlying the construction manager's letter by a 

Fitchburg State professor concluded that most of the contractors and subcontractors who had been 

identi fied as open shop, were in fact union contractors or had not actually worked on the project. Others 

were mere suppliers or professionals who were not covered by the PLA. See New Study of Boston Harbor 

Project Shows How PIA Hurt Competition, ABC Today, June 4, 1999, available at httpllabc.orglplastudies. 

A similar follow-up study by professors at the University of Nevada Las Vegas found that the earlier report 

of non-union participation on the Nevada Water Project included as non-union bidders numerous firms that 

were actually unionized prior to bidding on the PLA. See Opfer. Son, and Gambatese, Project Labor 

Agreements Research Study: Focus On Southern Nevada Water Authority (UNL V 2(00), available at 

httpllabc.orglplastudies. 

IO 
76 

competently complete the substantive work of the project.,,41 For this reason alone, the 

Proposed Rule must be rescinded or must take strong steps to mitigate the harm to 

competition that will otherwise be caused by encouraging federal agencies to impose 

PLAs on federal construction projects. 

3. The Proposed Rule And Executive Order Exceed The President's Authority 

Under The Federal Property Administrative Services Act. 

The sole statutory authority for the Proposed Rule, and for the President's 

Executive Order cited therein, is the Federal Property and Administrative Services Act 

(FPASA) of 1949.42 That Act is intended to "provide the Federal Government with an 

economical and efficient system" of government procurement. The Act gives the 

President the authority to "prescribe policies and directives that [he] considers necessary 

to carry out" the Act, only so long as such policies are "consistent with" the Act and with 

other laws (such as CICA). Unless the President has acted in a manner consistent with 

this statutory authority, neither the Proposed Rule nor Executive Order 13502 is valid.43 

In the present instance, the President's Executive Order and the Proposed Rule 

have offered no fact-based justification for their claim that PLAs are necessary to allow 

federal agencies to achieve "economy or efficiency" in the federal procurement of 

construction services. Rather, as discussed next below, the known facts regarding the 

federal government's prohibition of PLAs during the past decade show that none of the 

asserted justifications for federal PLAs have any basis in actual experience on federal 

construction projects in recent decades. As a result, the Executive Order and Proposed 

Rule cannot be found to be authorized by the FPASA.44 

a. The Asserted Justifications For The Proposed Rule Have No Basis In 

Fact. 

Section 1 of the Executive Order, mirrored in the Proposed Rule, asserts the 

following justifications, and only these justifications, for believing that PLAs will achieve 

greater "economy and efficiency" in federal construction procurement. As stated in the 

Proposed Rule:45 

41 Associated Builders & COil tractors of Rhode Islalld, Inc. v. Department of Admin., 787 A.2d 1179, 1188-

89 (R.T. 2002). 

42 40 U.S.c. § 10 I, et seq. 

43 See Liberty Mut. Ins. Co. v. Friedman, 639 F. 2d 164, 169-171 (4th Cir. 1981) ("[A) court must 

reasonably be able to conclude that the grant of [legislative) authority contemplates the regulations 

issued."). 

44 Because of the President's failure to justify his Executive Order with facts demonstrating a close nexus 

between government-mandated PLAs and increase economy and efficiency of federal procurement, such 

cases as AFL-C/O v. Kahn, 618 F. 2d 784 (D.C. Cir. 1979) are distinguishable. 

4574 Fed. Reg. at 33954 

II 
77 

The E.O. explains that a "lack of coordination among various employers, 

or uncertainties about the terms and conditions of employment of various 

groups of workers, can create friction and disputes in the absence of an 

agreed-upon resolution and mechanism". The use of project labor 

agreements may "prevent these problems from developing by providing 

structure and stability to large-scale construction projects thereby 

promoting the efficient and expeditious completion of Federal 

construction contracts." 

However, neither the Proposed Rule nor the Executive Order offer any factual 

basis for the above assertions in the current construction environment on federal projects. 

Indeed, the known facts refute any such claims. Specifically, the investigations of ABC 

and others indicates there have been no significant labor-related problems on any large 

federal construction projects since President Bush issued his Executive Order barring 

government-mandated PLAs on federal projects. There have been no publicly reported 

delays or cost overruns resulting from any "lack of coordination" among employers on 

labor issues, nor any reported labor disputes that have caused significant delays or cost 

overruns. In other words, none of the claimed labor problems, which again are the sole 

stated justifications for federal PLAs referenced in the Proposed Rule, have arisen on any 

of the thousands of large federal projects built since 2001, despite the outright prohibition 

of any PLAs on any large (or small) federal construction. 

The Office of Management and Budget has essentially admitted the complete 

absence of any factual support for the Executive Order and Proposed Rule in response to 

a Freedom of Information Act request filed by ABC which asked for all documents 

identifying any federal construction projects suffering from delays or overruns as a result 

of labor-related problems of the sort identified in Section I of the Executive Order. OMB 

produced no such documents, citing only to the Clinton Memorandum, the GAO study, 

and other studies of state and local PLAs. None of these studies identify any federal 

project that has suffered from any labor "challenge" due to the lack of a PLA. 

ABC submitted similar FOlA requests to every federal agency that has engaged in 

significant amounts of construction since 2001, and no agency identified in response any 

large federal construction project suffering significant cost overruns or delays as a result 

of any of the labor-related issues cited in the Executive Order or the Proposed Rule. ABC 

also surveyed its own members, receiving responses from contractors who have 

performed billions of dollars worth of large federal construction projects during the past 

decade. These contractors have uniformly confirmed that the absence of any of the labor 

"challenges" which were identified in the President's Executive Order as the sole 

justification for encouraging federal agencies to impose PLAs on future federal 

construction projects. Finally, a study of this issue conducted by the Beacon Hill Institute 

has also turned up no evidence of any significant labor problems on federal construction 

12 
78 

projects in the absence of PLAs. That study is hereby incorporated by reference and made 

part of these comments.46 

Thus, the entire factual premise underlying the President's Executive Order and 

the Proposed Rule is demonstrably false. There have been no labor problems on recent 

federal construction projects that justify imposition of PIA restrictions on future 

federal projects. 47 

b. PLAs Will Not Achieve "Economy" But Will Instead Increase Costs 

Neither the Executive Order nor the Proposed Rule identifies any factual basis to 

support the claim that government-mandated PLAs will cause any reduction in the costs 

of construction on large federal projects. Therefore, the Councils are not entitled to rely 

on any such claim in support of the Rule they have proposed. In any event, there is no 

factual basis for claiming that PLAs will reduce costs on federal construction projects, 

and the overwhelming weight of the evidence establishes that PLAs will cause increased 

costs to taxpayers. 

Incorporated by reference in these comments is the new study issued by the 

Beacon Hill Institute (BHI), referenced above, which estimates that PLAs on federal 

construction projects will increase the costs to taxpayers by millions of dollars, i.e., 

between 12% and 18% of the total costs of construction.48 BHI has performed a series of 

cost studies on public construction projects under PLAs based upon rigorous comparisons 

of similar projects built in various jurisdictions with and without PLAs. The studies have 

adjusted the data for inflation and controlled for such factors as the size and types of the 

projects, and whether new construction was involved. Each of these studies has 

demonstrated that government-mandated PLAs increase the costs of public construction 

projects in the 12-18% range. According to BHI, such increased costs result from the 

decreased competition for PLA-covered work, described above, and from the increased 

costs to non-union bidders of being subjected to union hiring and work rules. 

BHI's findings have been corroborated in many ways by both empirical and 

anecdotal evidence. Thus, a 2001 study published by the nonpartisan Worcester Regional 

Research Bureau estimated that PLAs increase project costs by approximately 15 %.49 As 

4b See Tuerck. Glassman and Bachmann. Union-Only Project Labor Agreements On Federal Construction 

Projects: A Costly Solution In Search Of A Problem. (August 2009). available at httpllabc.org/plastudies. 

47 For the same reasons, the discriminatory impact of the Executive Order and Proposed Rule violate the 

rights of non-union contractors and employees to Equal Protection under the laws. As shown above. there 

is no rational basis for federal agencies to impose PLAs on construction projects, given the absence of any 

factual justification for such actions in the Executive Order itself. 

" Ibid. 

49 Worchester Regional Research Bureau. Project Labor Agreements (2001). available at 

http://abc.org/plastudies. 

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79 

further noted above, the Roswell Park Cancer Institute was partially constructed under a 

union-only PLA. Comparisons of bid packages released under the PLA and bid packages 

undertaken without any union-only requirement revealed that costs of construction under 

the union-only PLA were 48% higher than without the PLA.50 Similarly, the Glenarm 

Power Plant in Pasadena, CA saw the low bid on its project increase from $14.9 million 

to $17.1 million expressly due to the imposition of a PLA. 51 

ABC has collected more than a dozen other examples from around the country of 

projects that were bid both with and without PLAs. In every instance, fewer bids were 

submitted under the PLA than were submitted without it; or the costs to the public entity 

went up; or both. That study is hereby incorporated by reference and made a part of 

these comments.52 

In addition to these direct comparisons in the bidding process, experience with 

public sector PLAs after contract awards at the state and local level has revealed many 

instances in which PLAs have failed to achieve promised cost savings, and have instead 

led to cost overruns, on such diverse public projects as stadiums, 53 convention centers,54 

civic centers,55 power plants,56 and airports,57 in addition to the several school 

comparisons previously mentioned.58 The most notorious example of a PLA failing to 

achieve promised cost savings is the Boston Central Artery Project (the "Big Dig"). 

Originally projected to cost $2.2 billion dollars, the Big Dig wound up costing more than 

50 Baskin, The Case Against Union·Only Project Labor Agreements, 19 Construction Lawyer (ABA) 14, 15 

(1999). 

" Power Plam Costs To Soar, Pasadena Star News, Mar. 21, 2003. 

52 See Examples of Projects Bid With and Without PtAs, available at http://abc.orglplastudies. 

5) Nationals Park COSTS Rise, Spans Commission Struggles, Washington Examiner, Oct. 21, 2008. Similar 

cost overruns were experienced on PLA-covered stadiums in Cleveland, Detroit, and Seattle. See Mayor's 

Final Cost at Stadium 25% Over, Cleveland Plain Dealer, June 24, 2000; Field of Woes, Crain's Detroit 

Business Magazine, June 18, 200 I; New Seattle Stadium Battles Massive Cost Overruns, ENR, July 

27/Aug.3, 1998, at 1,9. By contrast, Baltimore's Camden Yards and Washington's FedEx Field, among 

many other merit shop stadiums built around the country over the past two decades, were built without any 

union-only requirements, with no cost overruns. 

54 Washington Business Journal (March 2003). 

55 Troubled Center Moves Ahead, Des Moines Register, July 12, 2003; Say No to Project Labor Agreement, 

Des Moines Register, July 23, 2003; Civic Center Bids Exceed the Budget, Post-Bulletin, Sept. 28, 1999. 

56 Power Plant Costs to Soar, Pasadena Star-News, March 21,2003. 

57 SFO Expansion Project Hundreds of Millions Over Budget, San Francisco Chronicle, Dec. 22, 1999. 

58 Detailed discussion of these cost overruns on PLA projects around the country appears in Baskin, supra 

n. 34, at 5-12, available at abc,org/plastudies. 

14 
80 

$14 billion dollars, among the biggest cost overruns in the history of American 

construction projects. 59 

Faced with this overwhelming evidence of PLA cost increases, the PLA 

apologists have put forward a series of unconvincing explanations for the mounting 

adverse data. First, they have attacked the BHI studies for allegedly focusing on bid costs 

as opposed to actual costs and for failing to segregate labor costs or account for 

additional factors.6o BHI's new study, however, incorporated by reference in these 

comments,61 addresses and refutes the PLA apologists' economic analyses. BHI notes 

therein that the counter-studies have failed to acknowledge the numerous variables 

controlled for by BHI's previous studies, and that the apologists have relied on 

inappropriate variables that undercut their own premises. As stated in the latest BHI 

report: 

If PLAs really did increase efficiency, it would be possible to show 

statistically that they also reduce costs. The very regression provided by 

[Belman-Bodah-Philips] shows that PLAs do not reduce costs. 

* * * 

Economic theory suggests that by burdening contractors with 

union rules and hiring procedures, PLAs reduce the number of bidders and 

thus increase both winning bids and actual construction costs. We have 

provided many regressions, with various specifications, ... that confirm 

this hypothesis. 

As BHI has further pointed out, the burden should be on PLA proponents 

and the Executive Branch to prove that PLAs actually save money. This is 

particularly so in light of the obvious conflict between union-only PLAs and the 

principles of open competition discussed above. The Proposed Rule makes no 

effort to meet this burden, and in reality there is no proof that PLAs reduce costs 

in a competitive environment, under generally recognized standards of evidence. 

It should also be noted that in virtually every instance when PLA 

apologists have attempted to demonstrate how PLAs can reduce construction 

costs, they do so by comparing the costs of an already unionized project 

workforce with and without a PLA. 62 Such circumstances were once common in 

59 http//www.issuesource.org. 

60 Kotler, supra n. 20; Belman, Bodah and Philips, supra n. 20. 

61 Tuerck. Bachmann. and Glassman. Union-Only Project Labor Agreements 011 Federal Construction 

Projects: A Costly Solutioll/II Search Of A Problem. (Beacon Hill Institute at Suffolk University) August. 

2009. at 36, available at http://abc.org/plasludics. 

62 See Kotler supra n. 20; Belman, Bodah and Philips, supra n. 20. 

15 
81 

the construction industry, which was 87% unionized as recently as 1947. 

However, the demographics of the industry have so dramatically changed (only 

15% unionized), that it is now extremely rare for a federal agency to undertake a 

project on which there are no potential non-union bidders or subcontractors.63 

In the absence of such proof, and in light of the testimony in this 

proceeding demonstrating how and why PLAs increase costs to taxpayers, there 

can be no rational claim that government-mandated PLAs will achieve greater 

"economy" in the federal procurement process. For this reason as well, the 

Proposed Rule should be rescinded. 

c. PLAs Will Not Achieve "Efficiency" But Will Instead Cause 

Procurement DeJays 

In addition to failing to serve the interests of greater "economy" in federal 

procurement in accordance with FAPA's requirements, the Proposed Rule cannot be said 

to make the procurement process more efficient. In fact, the Proposed Rule would build 

into the procurement process additional steps that will inherently delay construction 

projects. 

According to the Proposed Rule, agencies are encouraged to decide whether to 

use a PLA before the agency knows the terms of the PLA or the alternatives. Specifically, 

the Rule requires that an agency decide whether to include a PLA in a bid solicitation 

which naturaJly occurs before bids are submitted by contractors. But at the pre-bid stage, 

the agency will not generally know the terms of the prospective PLA it is imposing, since 

the Proposed Rule contemplates that the PLA will be negotiated after bidding is 

completed. 64 In addition, an agency will not know the alternatives to using a PLA prior to 

receiving bids for the project that do not include a PLA. 

Moreover, the Proposed Rule leaves to the successful offeror the task of 

negotiating a PLA with all applicable unions, provided that specific terms of the PLA 

must be included. This means that, at the time the agency makes the decision whether to 

impose a PLA, the agency will likely not know whether such negotiations have been 

successful. Projects will therefore be delayed pending the outcome of the negotiations 

and projects may have to be rebid depending on the terms that are actually negotiated. 

An agency cannot make an informed decision about whether a PLA is in the 

government's procurement interests: (I) before it knows the terms of the PLA; (2) before 

the PLA is actually negotiated; and (3) before the alternatives to a PLA are known. On 

63 See discussion above al n. 15. See also NorthrUp, Government-Mandated Project Labor Agreements In 

Construction: A Force To Obtain Union Monopuly 0" Government-Funded Projects, (2000), available at 

http://abc.orglplastudies. 

'" 74 Fed. Reg. 33955. 

16 
82 

the other hand, waiting until after the successful offeror is selected and then imposing a 

PLA is inefficient as well as misleading to bidders. Either way, requiring a PLA under 

the Proposed Rule would be arbitrary and capricious and would clearly not bring greater 

"efficiency" to the federal procurement process. 

d: PLAs Will Not Achieve Greater Efficiency In Terms Of Productivity, 

Quality, or Safety 

Union-only PLAs do nothing to guarantee better quality, skills, or productivity on 

construction projects. There is certainly no evidence that union-only labor in the 21 Sf 

century is more skilled than merit shop workers.65 Some of the largest and most 

successful federal projects completed every year have been built on time and within 

budget by non-union contractors, or by a mixture of union and non-union companies, all 

without PLAs. Conversely, government-mandated PLAs have resulted in some of the 

poorest quality construction projects featuring extremely defective workmanship and 

lengthy delays in construction. Prominent examples of such inefficient and defective PLA 

projects include the Big Dig in Boston,66 the Washington, D.C. Convention Center,67 the 

Iowa Events Center,68 Milwaukee's Miller Park,69 and many others.7o There is thus no 

"efficiency" -based justification for mandating a PLA on federal construction projects. 

4. The Proposed Rule Discourages Bidding For Federal Construction 

Projects By Small And Disadvantaged Businesses, Thereby Violating the 

Small Business Act. 

As noted above, a great many of ABC's small business members, along with 

many other small non-union contractors who are not ABC members, perform work on 

65 After performing a thorough study of PLAs in the New York area. Ernst & Young concluded that 

"[tlhere is no quantitative evidence that suggests a difference in the quality of work performed by union or 

open shop contractors." Erice County (NY) Courthouse Construction Projects: Project Labor Agreement 

Study (September 2001), available at http://opencontracting.comfstudies. See also Northrup. GovemmentMandated Project Labor Agreements In Construction: A Force To Obtain Union Monopoly On 

Government-Funded Projects, J. Lab. Res. (1998). 

66 See WBZTV: $21 Million Settlement In Big Dig Tunnel Collapse. available at 

http://wbztv.comlbigdig. See also Powell, Boston's Big Dig Awash in Troubles: Leaks. Cost Overruns 

Plague Project. Washington Post. Nov. 19.2004, available at http://washingtonpost.com. 

67 Roof Section Col/apses at D.C. Convention Center Site. Washington Construction News (May 2001). 

68 Frantz. et al. The PLA for the Iowa Events Center: An Unnecessary Burden On The Workers. Businesses 

and Taxpayers of Iowa, Policy Study 06-3 (Public Interest lnstitute at Iowa Wesleyan College. April 2006). 

available at http://limitcdgovemment.orgfpublications/pubs/studies. 

69 Crane Accident Kills Three At Unfinished Miller Park. Washington Times. July 15. 1999. 

70 A more comprehensive list can be found in Baskin. Government-Mandated Union-Only PLAs: The Poor 

Record of Public Performance. available at http://opencontracting.comfstudies 

17 
83 

federal construction projects, including projects whose total cost exceeds $25 million. In 

a recent ABC membership survey, more than 35% of the respondents stated that they 

perform work on such projects. As has also been noted, 98% of these survey respondents 

further indicated that they would be less likely to bid on such work if a project labor 

agreement were imposed as a condition of performing the work.71 

The previously referenced discriminatory impact of PLAs falls particularly hard 

on small business subcontractors, many of whom are minority, women-owned and 

disadvantaged businesses. Several hundred individual contractor statements submitted in 

this proceeding testify to the negative impact of PLAs on small business procurements. 

See also the McGowan study of the discriminatory impact of PLAs on federal 

construction, cited above. 

The adverse economic impact of PLAs on small businesses in the construction 

industry directly contravenes Congress's repeatedly expressed intent to promote and 

encourage federal procurement to small businesses. Since 1978, when Congress amended 

the Small Business Act to require all federal agencies to set percentage goals for the 

awarding of procurement contracts to MBEs,72 the amount of federal procurement dollars 

directed towards small businesses has increased dramatically. The Small Business 

Administration reports that more than 38% of federal subcontracts, including 

construction contracts, are awarded to small businesses.73 

Further evidence of the impact of PLAs on small businesses is contained in 

comments being submitted in this proceeding by prime contractors who have themselves 

performed contracts in the $25 million-plus range. These comments uniformly confirm 

that they have subcontracted much of the work on such projects to small business 

subcontractors. See, for example, the comments of leff Wenaas, President of Hensel 

Phelps Construction, a prime contractor who has performed more than $6 billion in 

construction contracts on federal projects with costs exceeding $25 million. Hensel 

Phelps has subcontracted more than $3.5 billion of that amount to small businesses, the 

majority of whom are non-union. These percentages are typical of the experience of 

many other ABC members. As the comments repeatedly show, such small business 

subcontractors are very unlikely to continue to perform work on federal construction 

contracts under the Proposed Rule because they know that they will be discriminated 

against by PLAs. 

71 Newsline (July 22,2009), available at abc.org. 

72 P.L. 95-507 (1978), 15 U.S.c. 644 (g). 

73 See Clark, Moutray and Saade, The Government's Role in Aiding Small Business Federal Subcontracting 

Programs in the United States, Office of Advocacy, Small Business Administration (2006), available at 

sba.gov/advolresearch. 

18 
84 

The conflict between the Proposed Rule and the Small Business Act is 

exacerbated by the Councils' failure to comply with the Regulatory Flexibility Act.74 The 

RFA requires all agencies conducting rulemakings to "prepare and make available for 

public comment an initial regulatory flexibility analysis," which "shall describe the 

impact of the proposed rule on small entities.,,75 As part of its analysis, the agency is 

required to consider other significant alternatives to the rule which could affect the 

impact on small entities, and explain any rejection of such alternatives in its final 

regulatory flexibility analysis.76 The sole relevant exception to this requirement arises if 

"the head of the agency certifies that the rule will not, if promulgated, have a significant 

economic impact on a substantial number of small entities.,,77 The agency must provide a 

factual basis for its certification.78 Such a determination is subject to judicial review for 

its correctness under a non-deferential standard.79 

In particular, the Councils' failure to address the economic impact of the 

Proposed Rule on subcontractors plainly violates the RFA, as the U.S. Court of Appeals 

for the D.C. Circuit recently held in the closely analogous case of Aeronautical Station 

Assn, Inc. v. FAA.80 There the Court held that the FAA was required to consider the 

economic impact of a proposed drug testing rule on subcontractors who performed 

safety-related functions for air carriers. The D.C. Circuit found that both contractors and 

subcontractors (at whatever tier) "are entities subject to the proposed regulation - that is, 

those small entities to which the proposed rule will apply." 

It should also be noted that minority and disadvantaged businesses have voiced 

their opposition to government-mandated PLA requirements and are expected to do so 

again in this proceeding. The American Asian Contractors Association, The National 

Association of Women Business Owners, the National Black Chamber of Commerce, and 

the Latin Builders Association are among the groups that have gone on record as opposed 

to PLAs. The National Black Chamber of Commerce described PLAs as "anti-freemarket, non-competitive and, most of all, discriminatory." 

74 5 U.s.c. § 601. ABC's separate comments on the Councils' noncompliance with the RFA are hereby 

incorporated by reference. 

75 5 U.S.c. § 603(a). 

76 /d. at § 604. A "significant regulatory alternative" is defined as one that: I) reduces the burden on small 

entities; 2) is feasible; and 3) meets the agency's underlying objectives. See, A Guide to Federal Agencies, 

How to Comply with the Regulatory Flexibility Act, SBA Office of Advocacy, May 2003, p. 73-75 

(available at http://www.sba.gov/advollaws/rfaguide.pdfl. 

77 /d. at § 605(b). 

73 See North Carolina Fisheries Association v. Daley, 27 F. Supp. 2d 650 (E.D. Va. 1988). 

79 See Aeronautical Repair Station Assn, Inc. v. FAA, 449 F. 3d 161, 175-177 (D.C. Cir. 2007), reversing 

agency certification of lack of impact on small entities. 

8

°494 F. 3d 161 (D.C. Cir. 2007). 

19 
85 

For similar reasons, the Proposed Rule violates Executive Order 11246 and 

related longstanding affirmative action requirements. Far from encouraging contractors to 

employ minority employees or minority subcontractors, the Proposed Rule encourages 

federal agencies to impose PLAs which discourage non-union minorities from bidding on 

or perfonning the work. A significant number of PLAs have resulted in charges of 

minority discrimination and/or sexual harassment by union members.sl 

5. The Proposed Rule Constitutes Regulatory Interference With Private 

Employment Rights Under the National Labor Relations Act, ERISA, 

and the National Apprenticeship Act. 

Although the Proposed Rule purports to serve the federal government's 

proprietary interests, its establishment of a new government-wide policy in favor of PLAs 

constitutes unlawful regulation which interferes with private sector labor relations and 

fringe benefit programs in violation of the National Labor Relations Act and ERISA. The 

Proposed Rule is not protected from challenge by the Supreme Court's limited holding in 

Building and Construction Trades Council of the Metropolitan District v. Associated 

Builders and Contractors of Massachusetts/Rhode island, inc. ("Boston Harbor"),82 

because it is not limited in its scope to a single project.83 

In addition, the Proposed Rule violates Section Sed) of the NLRA, which was not 

addressed in Boston Harbor, because it imposes labor agreements on construction 

contractors over their objection.84 The Proposed Rule is also inconsistent with Sections 

See) and S(f) of the NLRA, which the Supreme Court referred to as exempting public 

entities from NLRA preemption, solely to the extent that such entities acted in a manner 

that was authorized for private construction users under the NLRA. Sections See) and 

S(f), however, only authorize PLAs to be entered into by "employers in the construction 

industry" and even then only in the "context of collective bargaining" on a voluntary 

basis, un-coerced by either unions or governments.85 

.. Sec Baskin, Government-Mandated Union-Only Project Labor Agreements: The Public Record of Poor 

Performance, at 27-29 (2009), available at http://abc.org/plastudics. 

82 507 U.S. 218 (1993). 

83 See Chamber of Commerce v. Brown, 522 U.S _, 128 S. Ct. 2408 (2008) ("In finding that the state 

agency had acted as a market participant, we stressed [in Boston Harbor] that the challenged action "was 

specifically tailored to one particular job," and aimed "to ensure an efficient project that would be 

completed as quickly and effectively as possible at the lowest cost." 

1<4 See 29 U.S.c. § 1 58(d), which expressly states that neither party to collective bargaining can be 

compel/ed by the government to agree to a proposal. See also H.K. Porter v. NLRB, 397 U.S. 99, !O3 

(1970). 

85 See Glen Falls Building and Construction Trades Council, 350 NLRB 417 (2007) (Invalidating a PLA 

imposed by an owner on construction contractors outside the context of the owner's collective bargaining). 

20 
86 

The Proposed Rule likewise violates ERISA 86 by encouraging federal agencies to 

mandate employer participation in union benefit programs covered by that Act, which 

ERISA has long declared to be voluntary, not mandatory. In addition, the Proposed Rule 

discriminates against non-union benefit programs that are supposed to be protected by 

ERISA, including non-union apprenticeship training programs. As noted above. 

employees of non-union contractors who are forced by federal agencies to sign PLAs will 

no longer receive credit towards their existing apprenticeship programs, and such 

employees will be forced to enroll in union apprenticeship programs (or alternatively, the 

non-union contractors will be forced to hire existing union apprentices instead of their 

own). Such government-mandated discrimination violates the National Apprenticeship 

Act, which has been previously found to prohibit union vs. non-union discrimination. 87 

6. The Proposed Rule Violates The Congressional Review Act. 

The Proposed Rule incorrectly states that "This rule is not a major rule under 5 

U.s.c. 804.,,88 ABC disagrees. The Congressional Review Act (as codified at 5 U.S.C. 

§804(2» defines a major rule as including any rule likely to result in: 

(A) an annual effect on the economy of $100,000,000 or more; 

(B) a major increase in costs or prices for consumers, individual industries, 

Federal, State, or local government agencies, or geographic regions; or 

(C) significant adverse effects on competition, employment, investment, 

productivity, innovation, or on the ability of the United States-based enterprises to 

compete with foreign-based enterprises in domestic and export markets. 

As discussed above, the imposition of PLAs on federal agency construction 

projects, even at the 10% level anticipated by the Councils will have significant adverse 

effects on competition, will also cause major increases in construction costs for federal 

agencies, and may have an annual effect on the economy of $100,000,000 or more. If any 

one of these effects is likely to occur then, at minimum the Councils are required to 

conduct a proper cost benefit analysis of PLAs, and otherwise comply with the "major 

rule" requirements of the CRA. 

For each of these reasons, ABC believes that the Councils must reclassify the 

Proposed Rule as a major rule and comply with all of the requirements of thc 

Congressional Review Act. 89 

86 29 U.S.c. § 1001, et Jeq. 

87 Associated Builders and Contractors. Inc. v. Reich. 963 F. Supp. 35. 38 (D.D.C. 1997). 

8~ 74 Fed. Reg. at 33954. 

89 ABC also objects to each of the findings contained in the Proposed Rule under the Data Quality Act, 

section 515 ofP.L. 106-554 (2001). In particular, the findings in support of the new policy on PLAs and the 

impact of this new policy on small businesses lack sufficient thoroughness and/or accuracy 10 meelthe 

level of quality lhal would permil their dissemination and use as the basis of the policy that the Councils' 

21 
87 

7. The Proposed Rule Fails To Establish Any Meaningful Criteria For 

Federal Agencies To Apply In Considering Whether To Impose PLAs. 

The Proposed Rule invites comments on the "factors for the contracting officer to 

consider in detennining whether use of a PLA will be in the best interest of the 

government." Without conceding that a government-mandated PLA is ever appropriate or 

lawful on a federal construction project, ABC responds to the Councils' invitation as 

follows: 

Before any agency decides to implement a PLA on a project, the agency should at a 

minimum take the following actions: 

1) The agency should first detennine that the project cost will exceed $25 million. If 

not, then no PLA should be considered or required. 

2) The agency should then detennine whether the PLA is consistent with applicable 

law. In particular, if the procurement is covered by the Competition in 

Contracting Act, 41 U.S.c. § 253, then no PLA should be required that would be 

inconsistent with CICA's mandate to "obtain full and open competition." 

3) To detennine whether the PLA will result in less than full and open competition, 

the agency should issue at least 30 days' notice to interested parties (potential 

bidders, construction trade associations, and other stakeholders) that the agency is 

considering whether to require a PLA on the project and obtain comments or hold 

a hearing on the issue. Without obtaining comments from affected stakeholders, 

the agency is unlikely to obtain information necessary to detennine the impact of 

the PLA on full and open competition as required by CICA. 

4) In the course of such hearing/notice and comment process, the agency should 

detennine whether a PLA would discourage interested parties, including potential 

subcontractors, from bidding to perfonn work on the project. If there is evidence 

that a PLA would discourage interested parties from bidding, indicating an 

adverse impact on full and open competition then no PLA should be further 

considered or required. 

5) The agency should also detennine whether a PLA would achieve procurement 

cost savings for the agency, thereby increasing economy and efficiency in 

procurement. Unless it can be proven that a PLA would generate such increased 

costs, no PLA should be considered or required. 

6) The agency should also detennine whether there is evidence that a PLA would 

result in increased costs of construction. Unless it can be proven that a PLA 

are proposing to set through this rulemaking, as required by the DQA and the Office of Management and 

Budget guidance issued thereunder. 

22 
88 

would not generate such increased costs, no PLA should be considered or 

required. 

7) The agency should also determine whether there have been any labor-related 

disruptions causing delays or cost overruns, of the type identified in Section I of 

the Executive Order, on similar federal projects undertaken by the agency in the 

geographic area of the project. Such labor-related challenges include "lack of 

coordination among various employers, or uncertainties about the terms and 

conditions of employment of various groups of workers, causing friction and 

disputes." /d. If no such labor-related issues have arisen on similar federal 

projects undertaken by the agency in the geographic area of the projcct, then there 

is no justification for considering or requiring a PLA. 

8) The agency should determine whether substantially all of the potential bidders for 

the project are already union signatory contractors who have agreed to union-only 

subcontracting clauses in their bargaining agreements. If not, then a PLA should 

not be considered or required. 

9) The agency should determine whether the process of negotIatIng the PLA 

between the successful contractor and any applicable unions might delay the 

award of the project. If so, then a PLA should not be considered or required. 

10) The agency should determine whether imposition of a PLA will have an adverse 

impact on small or disadvantaged businesses, including subcontractors. If so, then 

a PLA should not be considered or required. 

II) In the event that the agency does exercise its discretion to require a PLA, the 

agency should take steps to minimize the discriminatory impact of the PLA on 

previously non-signatory contractors, subcontractors and non-union workers. 

Such steps should include but not be limited to prohibiting imposition of PLAs 

which require previously non-signatory contractors to participate in or contribute 

to union fringe benefit trust funds from which their employees cannot receive 

benefits during the life of the project. PLAs should also not be allowed to restrict 

contractors or subcontractors in their hiring practices, nor should they be allowed 

to force employees to join labor unions who such employees have not selected as 

their bargaining representatives. 

12) At all steps in the process outlined above, the burden should always be on those 

who are considering or advocating a PLA to prove by clear and convincing 

evidence that the PLA will not injure competition, is justified by the needs of 

economy and efficiency, and will not adversely impact small and disadvantaged 

businesses, including subcontractors. 

23 
89 

CONCLUSION 

For each of the reasons set forth above and in ABC's separate comments on the 

Councils' apparent violation of the Regulatory Flexibility Act, the Proposed Rule should 

be rescinded or severely modified to avoid or mitigate the discriminatory and anticompetitive impact of PLAs on 84% of the construction industry, including many smaIl 

and disadvantaged businesses and their employees, and to comply with applicable law. 

Of Counsel: 

Maurice Baskin, Esq. 

Venable LLP 

575 7th St., N.W. 

Washington, D.C. 20004 

202-344-4000 

Respectfully submitted, 

Robert A. Hirsch, Esq. 

Director of Legal and Regulatory Affairs 

Associated Builders and Contractors, Inc. 

4250 Fairfax Drive 

Arlington, V A 

703-812-2000 

24 
90 

Written Comments 

of 

Robert Hesser, 1

st Co-Chairman, 

Veterans' Entrepreneurship Task Force 

(VET-Force) 

on 

The American Recovery and Reinvestment Act of 2009 (ARRA) 

and 

The Small Business Contracting Revitalization Act of 2007 (S.2300) 

to 

The Senate Committee on Small Business and Entrepreneurship 

Roundtable Entitled 

"Small Business Contracting: 

Ensuring Opportunities for America's Small Businesses" 

Tuesday, September 21, 2009 

Russell Senate Office Building 

Washington, D.C. 
91 

Robert Hesser, Veterans' Entrepreneurship Task Force (VET-Force) 

September 22, 2009 

This document addresses PUBLIC LAW 111-5-FEB. 17, 2009, "American Recovery and 

Reinvestment Act of 2009 (ARRA)", specifically 

123 STAT. 118, page 4, Department of Agriculture, "Distance Learning, Telemedicine, and 

Broadband Program" under Rural Electrification Act of 1936 for Grants up to $2,500,000,000; 

and, 

123 STAT. 512, page 398, Department of Commerce, "Broadband Technology Opportunities 

Program" under the National Telecommunication and Infonnation Administration (NTIA) for 

Grants up to $4,700,000,000. 

These grants are to be given to states/companies capable of perfonning the requirements. 

TITLE VI-BROADBAND TECHNOLOGY OPPORTUNITIES PROGRAM, Section 6001, 

subparagraph (h) is the only mention of a small business throughout the 457-page document. 

"(h) The Assistant Secretary, in awarding grants under this section, shall, to the extent 

practical-

(I) award not less than 1 grant in each State; 

(2)consider whether an application to deploy infra-structure in an area-

(A) will, if approved, increase the affordability of, and subscribership to, service to the greatest 

population of users in the area; 

(B) will, if approved, provide the greatest broad-band speed possible to the greatest population of 

users in the area; 

(C) will, if approved, enhance service for health care delivery, education, or children to the 

greatest population of users in the area; and 

(D) will, if approved, not result in unjust enrichment as a result of support for non-recurring costs 

through another Federal program for service in the area; and 

(3) consider whether the applicant is a socially and economically disadvantaged small business 

concern as defined under section 8(a) of the Small Business Act (15 U.S.C. 637)." 

This one time recognition of a small business possibility is a recognition that only requires the 

Secretary to "consider whether the applicant is" an 8(a). 

The stimulus ARRA Bill was to create more jobs and strengthen the economy. At least 94% of 

all employed citizens are employed by small business. How can the stimulus funds increase 

jobs when small businesses are not involved? This is a major error most likely caused because 

of the unprecedented speed in passing Public Law 111-5 (ARRA). 

Grants are not nonnally subject to FAR procurement regulations. It is our understanding that 

there is nothing preventing a grant being based upon stipulations requiring fair inclusion of the 

2 
92 

Robert Hesser, Veterans' Entrepreneurship Task Force (VET -Force) 

September 22, 2009 

required small business procurement floor of23%. The required 3% for prime and 

subcontracting dollars for Service-Disabled Veteran-Owned Small Businesses can be levied 

upon the states receiving the grant(s). 

The Federal government has not provided 3% of procurement dollars in contracts with ServiceDisabled Veteran-Owned Small Businesses on time since 1999. In fact, most agencies have not 

made greater than 1.0%. The fact that there is $7,200,000,000 stimulus funds allotted for the 

combination of the "Broadband Technology Opportunities Program" and "Distance Learning, 

Telemedicine, and Broadband Program," there is an opportunity to make up a part of the 

procurement dollar shortage by requiring states and large business to set-aside 3% of the Grant 

dollars for SDVOSB's. 

Also, Telecommunications and IT skills among SDVOSB's is available throughout the United 

States. 

We want to remind all that the United States Congress issued Findings within Public Law 106-50 

under Title I, Section 101 stating: 

"Congress finds the following: 

(I) Veterans of the United States Armed Forces have been and continue to be vital to the 

small business enterprises of the United States. 

(2) In serving the United States, veterans often faced great risks to preserve the American 

dream of freedom and prosperity. 

(3) The United States has done too little to assist veterans, particularly service-disabled 

veterans, in playing a greater role in the economy of the United States by forming and expanding 

small business enterprises. 

(4) Medical advances and new medical technologies have made it possible for servicedisabled veterans to playa much more active role in the formation and expansion of small 

business enterprises in the United States. 

(5) The United States must provide additional assistance and support to veterans to better 

equip them to form and expand small business enterprises, thereby enabling them to realize the 

American dream that they fought to protect." 

Executive Order 13360 states: 

"Section I. Policy. America honors the extraordinary service rendered to the United States by 

veterans with disabilities incurred or aggravated in the line of duty during active service with the 

armed forces. Heads of agencies shall provide the opportunity for service-disabled veteran 

businesses to significantly increase the Federal contracting and subcontracting of such 

businesses. To achieve that objective, agencies shall more effectively implement section 15(g) of 

the Small Business Act (15 U.S.C. 644(g», which provides that the President must establish a 

goal of not less than 3 percent for participation by service-disabled veteran businesses in Federal 

contracting, and section 36 of that Act (15 U.S.c. 657f), which gives agency contracting officers 

the authority to reserve certain procurements for service-disabled veteran businesses. 

3 
93 

Robert Hesser, Veterans' Entrepreneurship Task Force (VET-Force) 

September 22, 2009 

The Federal government has not been close to meeting their 3% SDVOSB's minimum 

requirement in any year since 1999. This is a golden opportunity to show veterans that congress 

and the current administration is supporting the veterans. 

The following comments are concerning the Center for Veterans Enterprise, Veteran 

Affairs: 

Public Law 109-461 and Executive Order 13360 provide the VA Center of Veterans Enterprise 

(CVE) authority for maintaining a data base with data on Veteran-Owned (VOSB) and ServiceDisabled Veteran-Owned (SDVOSB) small businesses. The legislation gives VA contracting 

officers the mandate to procure products and services from SDVOSB concerns first or VOSB 

concerns second. If the VA cannot find a SDVOSB or VOSB capable of meeting the 

requirement the procurement can then be sought elsewhere. It is logical that such a mandate 

(significantly different than other agencies) should accompany a program outside the normal 

Federal Acquisition Regulations. Thus, the VA published and instituted 38CFR74 setting forth 

policy assisting VA procurement personnel. Agencies other than the VA are not part ofPL 109-

461 or 38CFR74. The VA stilI uses the FAR for guidance. 

Agencies other than the V A procure from VOSB and SDVOSB concerns under authority of 

Public Laws 106-50, 108-183, Executive Order 13360 and FAR 19. 

Agency procurement authorities other than the V A, per Public Laws 106-50 and 108-183, accept 

self-certification of status from VOSB and SDVOSB concerns. 

The VA CVE interpreted PL 109-461 and EO 13360 as giving them the authority to verify all 

VOSB and SDVOSB concerns requesting verification because the concern wants to do business 

with the VA. The VA CVE has created a verification process supposedly under the regulation 

38CFR74. The concept of verifying VOSB and SDVOSB concerns is supported by many 

Veteran Organizations, Veteran Service Organizations, VOSB's, SDVOSB's, the legislative 

branch, and the VET, Force. VA CVE has published on their web page that PL 109-461provides 

" ... an option when registering their businesses in VIP: be verified for ownership and control or 

self-represent." Where in the statute does it use the term "self-represent?" Also on their web 

page is "Verified businesses will be annotated in the database and will receive the rights to 

display the Verified logo in their marketing materials." Where did the statutes authorize a 

"Verified logo?" or Verified pin? Why is the VA CVE setting "Verified" concerns aside as 

being special?" The only "special" is that they got verified in the first 1,000 when there are still 

over 12,000 to go. 

It is not productive when VA CVE management puts a fence around some and unjustly elevates 

others. The only plus in such a program is building a dynasty for CVE management. At four 

meetings with the CVE management, at four VET-Force meetings, and during meetings and 

panels at the August 2009 VET-Force Congressional Roundtable the VET-Force expressed deep 

concern that CVE's daily actions are severely damaging the VOSB/SDVOSB procurement 

program and destroying efforts contributed by thousands of supporters. The VET-Force has 

made its stance clear that providing agencies outside the VA with access to the company names 

who have been verified under Public Law 109-461 and 38 CFR 74, must be immediately 

4 
94 

Robert Hesser, Veterans' Entrepreneurship Task Force (VET -Force) 

September 22, 2009 

stopped, eVE has procurement officials at non-VA agencies referring to "self-certified" VOSB 

and SDVOSB concerns as being "self-represented," 

There are cases where a non-V A agency sends out a sources sought for a SDVOSB concern 

selling a specific product or service. There are perhaps twenty responses received. The 

contracting ofiicer, sincerely believing they are doing the "right" thing, checks the Central 

Contractor Register (CCR) and VA CVE VETBIZ data bases. They find all twenty in the both 

data bases. All twenty "self certify" (in accordance with PL 106-50) that they are SDVOSB's. 

Six have been fortunate to get through the VA CVE verification program. The six verifications 

are prominently shown in VETBlZ data base. The contracting officer sends six bid packages to 

six out the twenty SDVOSB's responding to the sources sought. The remaining 14 will possibly 

never know why they were rejected. If they do, it will most likely be after an award. 

By the time all 13,000 VETBIZ entries are verified (6-years) there will be so much 

misunderstanding in the federal procurement sector that the program will be destroyed. We are 

providing one example as proof that VA eVE management's refusal to get things straight is, in 

fact, destroying the program and trust veterans have in the VA. Here is email text showing VA 

eVA management should be ashamed of their "self-represent," their "Veritied Logo," and giving 

verification data to anyone outside the VA. 

"From: I. M. Him 

Sent: Wednesday, August 19,20099:06 AM 

To: U. R. To 

Subject: Outreach session for Service Disabled Veteran Owned Small Businesses 

(SDVOSB) 

Ms. To, 

I saw the FBO posting for the Outreach session for SDVOSB's that the Agency is hosting 

and we are interested in attending. 

In the second paragraph of the posting, it states: "THIS OPPORTUNITY IS ONL Y 

AVAILABLE TO BUSINESSES CERTIFIED AS SDVOSB." Under the FAR, SDVOSB's 

are self certifying. Could you please clarify what certification is being referred to in the 

posting? 

Regards, 

M.Him 

Chief Operation Officer 

MMM,Inc. 

A Services Disabled Veteran Owned Small Business 

Vienna, VA 22182 

Tel: " 

5 
95 

Æ 

Robert Hesser, Veterans' Entrepreneurship Task Force (VET-Force) 

"From: U. R. To 

Sent: Wednesday, August 19,20099:46 AM 

To: I.M. U 

Cc: 

September 22, 2009 

Subject: RE: Outreach session for Service Disabled Veteran Owned Small Businesses 

(SDVOSB) 

Still please attend the event, but you cannot self certify as a SDVOSB, you must go through 

VA, you can consult the Small Business Administration with the VA, or call YYY with xxx, 

SBA at 777.777.7777 for more information. 

U. R. To 

Office of Purchasing and Contracts 

Bethesda, MD 

E-mail: U.R.To @nnn.gov 

Phone: " 

The VET-Force requests that the access to "verified or not verified data" be given to only VA 

personnel until a reasonable percentage of the 13,000 are verified. This must be done 

immediately without delay. We request the VA website be changed to reflect the correct legal 

wording of "self certified" versus the "self-represent." The CVE web page needs dramatic 

change from self-serving text and to stop misleading veterans, government employees, and large 

contractors. 

The VET-Force is extremely concerned that it is taking such a long time to establish the 

necessary Veteran Resource Centers across the United States. 

Robert G. Hesser 

I st Co-Chairman, VET -Force 

Master Chief Petty Officer, 

U.S. Navy Permanent Disability Retired 

12262 Streamvale Circle 

Herndon, VA 20170 

(703) 318-8819 

bhesser@VET-Force.org 

6